Family businesses see largest growth increase in 15 years: traits like values, employee communication, digital capabilities stand out in companies which outperformed peers: PwC Global Family Business Survey.
Family businesses with a company purpose connected to the United Nations’ Sustainable Development Goals (SDGs) are performing better than their peers across multiple financial and social metrics, according to PwC’s 11th Global Family Business Survey.
The report, Transform to Build Trust, which polled over 2,000 family businesses across 82 countries between October 2022 and January 2023, reveals double-digit sales growth at 43% of family businesses globally in the last financial year, up from 21% in 2021.
Notably, nearly three-quarters (73%) of family businesses that experienced double-digit growth over the last financial year are those with a clear set of family values and an agreed purpose for the business. This year’s survey reveals an upward trend in the share of family businesses willing to lead the way in sustainable business practices, with half (50%) of firms surveyed with a purpose connected to the UN’s Sustainable Development Goals seeing double-digit growth during the same period.
Family businesses bounced back after the COVID-19 pandemic, and despite a positive commercial outlook in 2023, the data reveals a disparity between priorities for leaders and focus areas that are typically associated with higher levels of growth. High-performing family businesses in 2023 are shown to have:
- Employee incentives (53%)
- Boards committed to diversity (52%)
- Strong digital capabilities (47%)
As challenging macroeconomic headwinds impact businesses globally, family businesses in 2023 are largely committed to protecting the core business, covering costs, and surviving, increasing significantly as a key priority (+37%) in 2023 rather than pursuing digital capabilities and introducing new products and services. Just over a third (36%) of family businesses say they are focused on attracting and retaining talent – despite the understanding that employee trust is critical to business success.
There is clear evidence that being very advanced in having an agreed and communicated ESG strategy correlates strongly with success and other positive attributes. Half (50%) of those surveyed who are very advanced in having an agreed and communicated ESG strategy saw double-digit growth (42% for family businesses not very advanced in this area).
Building trust through a commitment to purpose
Fundamental to the unique challenges in the management of family businesses, those that are purpose-led generally experience higher levels of trust (59%) between family members. According to Edelman’s 2023 Trust Barometer, customers now more than ever expect action from businesses on social issues, and this is reflected in the growing number of family firms that achieved double-digit growth (52%) in the past year, as found in PwC’s survey.
Furthermore, more businesses (10%) that are working hard to build trust within their companies experienced a higher level of growth in the same period. However, only a minority of family businesses are taking routine action to ensure the purpose is being tracked effectively, with 46% of respondents publishing it online and 36% actively communicating it to family members.
Notably, despite the correlation between delivering on ESG (62%), diversity and trust with customers, only 22% of family businesses globally are currently focused on it. With nearly all respondents considering customers their most essential stakeholder group (95%), and more businesses that are advanced on DEI (10%) and ESG strategies (8%) experiencing double-digit growth, there is an opportunity for family businesses to gain a competitive advantage in the face of radical disruption and a changing economic landscape.
Peter Englisch, Global and EMEA Family Business Leader, PwC, said:
“Family businesses are showing they can grow by welcoming change and building trust with digital communication and diverse boards – even in a challenging landscape. To continue this trajectory, firms will need to re-orient to focus on delivering value not just for customers, but for society. Transformation, purpose, and legacy are no longer converse, but intertwined.”
Digital capabilities for better corporate governance and customer relations
Critical to supporting governance structures and managing real-time information that feeds into decision-making processes, nearly 10% more family businesses that have strong digital capabilities experienced double-digit growth in the past year. Also facilitating processes to gather customer and employee feedback, family firms fully trusted by these stakeholders tend to be more digitally advanced.
However, only two-in-five (42%) feel they have strong digital capabilities and the share of firms focussed on improving in this area as a key priority has fallen as a top priority for family businesses since 2021, with 52% ranking digital capabilities as a top five priority for the next two years.
Peter Englisch, PwC Global and EMEA Family Business Leader, concluded:
“While market pressures and rising costs mean survival is the main priority for family businesses globally, our latest data shows that those family businesses which are focussed on digital transformation and diversity, are reaping the rewards. Now more than ever, building competence and achieving strong financial performance are linked to corporate responsibility. The message is clear, for family businesses to survive, they must transform. And that transformation is now.”
Board diversity is key for transformation
Legacy and succession planning are top-of-mind for family businesses in 2023, with younger and external voices often cited as advocates for change and progression. For example, those adopting digital transformation tend to have more diverse boards (49%).
In this year’s report, having more than two non-family board members was strongly associated with double-digit growth. These firms also tend to be more advanced in areas such as contributing solutions to society, the environment, and diversity, equity & inclusion, focus areas that were also linked to stronger financial performance. Yet one-third of all respondents only have family members on the board, a quarter have no-one from a different industry background, and only 9% are considered diverse.
Family businesses with board diversity have a slight advantage of those that do not in terms of reported double-digit growth this year (46% and 43%, respectively). However, one-third of family businesses have family members on the board, a quarter have no-one from a different industry background on the board, and only 9% are considered diverse.