Special session - Family and the success in business

To whom is it addressed? – Entrepreneurs, managers who work in family businesses, young people and everyone interested in starting a business in the future

What is the procedure? – Moderated Q&A sessions

TOPIC

A steady segment of the economy, family businesses make up 70-90% of the global GDP and they are a barometer of economic and social health. 35% of the companies in Fortune 500 are family businesses. Despite the difficult economic environment, burdened by the lack of talented workforce, by the challenges of innovation and corporate governance, family businesses show resistance and a capacity for adaptation.

In order to continue to grow, family businesses should innovate all the time and professionalize the way they perform their operations. These are some of the conclusions of the seventh biannual survey carried out by PwC on a global sample of 2,378 family business owners and managers in over 40 countries, including Romania.

In this context, the second edition of the report on the main results of PwC Family Business Survey for Romania brings to attention three major topics:

• The need of professionalization becomes more and more an essential concern of family businesses. The importance of professionalizing the way they operate – from systems and procedure to the company’s management – has grown in comparison to the previous edition of the survey, with the growth of pressure on prices, the increase in costs and the influence of mega-trends that change the path of the global economy. Professionalizing the business has to be paired with a “professionalization” of the family and its relations with the company.
• Planning succession. There is a dynamic of the “family factor” which can have a major impact on the company, an impact that seems to be ignored for now by some of the family businesses. One of the main aspects as far as the “family factor” is concerned refers to approaching succession. Romanian entrepreneurship is going through one of the most important stages of its evolution since 1989 – the first exchange of generations. This stage will end either with keeping the business in the family (transfer to the new generation), or with sales and, unfortunately, even the disappearance of some companies. The ratio of these transformations are difficult to anticipate, though, but we will definitely see successful stories and dramas alike. From this standpoint, both the costs and benefits of this process will be part of the founder’s portfolio and, therefore, they should be assumed carefully and with great responsibility.
• The importance of innovation. The family businesses in Romania consider it is more difficult to be competitive in the current economic context and they are aware of the need to keep up with the changes in an environment that is increasingly fluid and disruptive, where innovation is the key, but the availability of skills is limited and competition is more and more aggressive.

Sifted by the crisis, most family businesses in Romania are facing a time of important changes. The way they will valorize their advantages and they will respond to challenges, both internal and those of a global market where the speed of changes exceeds any predictions, will be decisive.

In this first action dedicated to family businesses in Romania, we will have an interview on stage with a few young family businesses and we will focus on innovation, the importance of innovation in the businesses of the digital era.

Two thirds (67%) of the family businesses in Romania consider the need to perpetually innovate as one of the most important challenges of the next five years. In addition, respondents are aware of the fact that skills availability is limited, half of them (49%) stating that identifying and recruiting highly qualified workforce is a major challenge that they will be facing over the next 12 months. In this context, owners and executive managers of family businesses understand the importance of digital technologies for the long-term success of their companies. Thus, 90% of the family businesses in Romania (72% at a global level) admit they will have to adapt their organization to be able to valorize the opportunities provided by digital technology and to avoid being overtaken by more advanced competitors from this point of view. And in order to reach this goal, 67% of the respondents agree that attracting efficient staff, who can implement the conversion to the digital, must be a priority on the business agenda.

Recruiting talented employees in the field of digital technology is on top of the list of priorities for 43% of owners and executive managers of family businesses at a global level, as well.

Family businesses aim to grow faster, to become more profitable, to develop internationally, to diversify and enter new markets, to manage risks better or to innovate more efficiently. In order to manage all of this, they need to structure and to discipline their vision, to channel their energy and to bring efficient human capital in the organization.

But talents cannot be valorized optimally, at their full potential, if inside the company no systems and procedures are implemented to allow them to work at their maximum capacity.

An increasing number of family businesses appreciate the added value brought by professional, experienced management, although they admit it is difficult to find and recruit staff with the necessary expertise, as family businesses are often perceived as more problematic than other types of companies.

Attracting and retaining talented employees keeps being a challenge, as family businesses are competing against the careers provided by large multinational companies.

Attracting talent outside the organization can be done more efficiently if the advantages of the family businesses are promoted adequately – they provide a human element and a feeling of belonging that can be found less and less frequently in other types of businesses.

Almost two third (64%) of the family businesses in Romania have people who are not members of the family in the managing board, in an attempt to bring new skills to the company (55% in the previous edition of the survey). Globally, a similar percentage (65%) of respondents state they have attracted people outside the family in the managing board of their business.

34% of the family businesses (in Romania and worldwide) have offered shares to the company to the employees that are not part of the family (as opposed to 47% in Eastern Europe). In addition, another 18% of the respondents in our country (the same percentage globally) intend to offer shares to their non-family staff in the next five years (percentage significantly higher than in the previous edition, namely 6%).

An attitude of opening outside the family is manifested by over a quarter (28%) of the family businesses in Romania (29% worldwide), which are composed of both people outside the family, who are part of the managing board, and non-family members employees who have shares.

We can notice a greater focus of family businesses in Romania on motivating people outside the family, compared to the previous edition. Thus, in 70% of the family businesses, people who do not belong to the family are part of the managing board or they own shares (as opposed to 55% in the previous edition), a percentage close to the one recorded globally (69% worldwide).