Our current and previous research has shown that the entrepreneurial orientation of family businesses is a strong contributor to their financial, social and non-financial performance, and keeping the entrepreneurial spirt alive is a top priority. But entrepreneurialism alone isn’t enough. The pride and emotional value that family members gain by owning and managing the business — often described as their socioemotional wealth – also contributes to the overall performance of their firm beyond financial results, including family unity, loyalty to the business and social impact.
When the level of entrepreneurial orientation and socioemotional wealth are high, the company’s performance also tends to be high across every key measure. And, as might be expected, when the entrepreneurial orientation and socioemotional wealth are low, overall performance is generally low as well.
What can family businesses do to strengthen their performance and long-term regenerative power?
Thanks to the experiences and insights contributed by family business leaders, academics and professional advisers, we have developed four family business performance profiles: “Entrepreneurial families”, “Business-first families”, “Family-first businesses” and “Underperforming businesses”.
Each profile illustrates the impact that different levels of entrepreneurialism and socioemotional wealth have on firms’ business, social and family performance.
Entrepreneurial orientation and the family’s socioemotional wealth are equally important for driving superior performance. This combination is a unique capability of family businesses and an important factor in sustaining a competitive edge.
Entrepreneurial families
1. High entrepreneurial orientation
2. High socioemotional wealth
Performance
- High levels of performance across all measures
- Particularly high financial outcomes, as well as non-financial/family performance (the factors related to socioemotional wealth)
- High levels of internal and external social performance
- High levels of digitalization, with strong alignment between their digital and overall business strategies
- This is often a reflection of the virtuous circle of entrepreneurialism creating social value, which in turn can help drive business value and vice versa.
Business first-families
1. High entrepreneurial orientation
2. Low socioemotional wealth
Performance
- High levels of financial, internal and external social performance
- Moderately high levels of digitalization
- Lower levels of non-financial/family performance
The high financial performance of these companies is often a reflection of the level of entrepreneurialism that is typically embedded in their family structure and part of their DNA.
Family first-business
1. Low entrepreneurial orientation
2. High socioemotional wealth
Performance
- Relatively high levels of non-financial performance,especially in terms of the family’s control and influence
- Lower levels of financial and social performance
Family-first businesses enjoy strong bonds between the family and the business. However, sometimes the founder’s original entrepreneurial spirt begins to decline over time.
Underperforming business
1. Low entrepreneurial orientation
2. Low socioemotional wealth
Performance
- Low levels of digitalization, financial, non-financial/family and external social performance
- Medium level of internal social performance
These companies have a low overall entrepreneurial orientation in each of the individual factors of innovativeness, proactiveness and risk-taking. They also demonstrate low levels of socioemotional wealth in terms of family control and the family’s emotional attachment and identification with the business.
Further insights and suggested actions for helping to sustain or improve levels of performance have been provided by family business leaders, advisers and academics across the world and can be found in the report “The regenerative power of family businesses – Transgenerational entrepreneurship” (PDF 927.3 KB).
Our people
Robyn Langsford
Global Lead, KPMG Private Enterprise Family Business, KPMG International and Partner in Charge, Family Business & Private Clients, KPMG
KPMG Australia
