Australian family businesses are optimistic about their future growth prospects and are becoming increasingly adept at managing and facilitating change.
"It is no surprise that family businesses with an entrepreneurial culture are outperforming others. Innovativeness, the willingness to take risks, delegate authority and proactively seek new ideas and opportunities are all important attributes for developing a sustainable competitive advantage, that technology can help to harness.” – Bill Noye
Since 2005, we have sought to better understand the unique nature, opportunities and challenges of family owned businesses, and in this year’s survey we have gone deeper, to identify the characteristics of high performing family businesses.
Produced in collaboration with Family Business Australia and the University of Adelaide's Family Business Education and Research Group (FBERG), the Family Business Survey 2015 reveals the five key trends that are shaping the future of Australian family business.
One of the greatest challenges in 2015 is balancing business objectives with those of the family. Results from this year’s survey also suggest that this is one of the top reasons for conflict in family business.
Top business objectives include product and service quality, cash flow, and net profit. Top family objectives include financial security for the family, personal challenge, satisfaction and rewards; and quality of life outside work.
Below are the characteristics of family businesses that are able to achieve a business/family objective balance:
We found that too much emphasis on business can cause conflict and resentment within the family. Conversely, an over-emphasis on family objectives can undermine business performance.
Over 80 percent of the family businesses surveyed indicated they had experienced some conflict or tension between family members over the last 12 months. The most common reasons for conflict were issues around the following:
Analysis of the 2015 survey data reveals that family businesses with a Family Council (i.e. formal family gatherings) are significantly less likely to have encountered conflict within the family within the last 12 months.
Nearly 80 percent of businesses surveyed say they are optimistic about their future growth prospects, but we also wanted to know the effect of technological change on family businesses.
Businesses agreed that technological change is creating disruptions in the way business is done, with more than half of reporting that this change is creating a positive impact on their business, including:
However, over 20 percent indicated that technological change is increasing the costs of doing business, as well as increasing competition.
There is an increasing trend for family businesses to adopt formal governance mechanisms. These are critical for aligning the needs of both the family and the business, developing goals and increasing business performance.
Significant increases in the 2015 survey included:
There is also a noticeable trend for family businesses to appoint non-executive directors from within the family. Seventy-two percent of non-executive directors are family members, which is more than 50 percent higher than 2013.
For all family CEOs, there will come a time to pass on the leadership baton. Seventy-six percent of businesses surveyed expect to appoint a new CEO in the next 5 years, and 60 percent of those businesses intend to pass on leadership to a family member.
It is essential that a suitable successor is appropriately prepared and that the CEO hands over the reins in a timely manner. However, 55 percent of those passing on leadership in the next 2-3 years do not believe their successor is ready. CEOs believe their potential successor needs to work on:
In regards to ownership, the survey overwhelmingly suggests that most family businesses will undergo some form of ownership change in the next 5 years:
Consistent with prior research, family businesses appear to be ill-prepared for exit/succession with regard to their documented plans, however, encouragingly are more prepared than in 2013.