New Research Shows What’s Driving Resilience and Regeneration in Today’s Global Family Businesses

Annual report from KPMG Private Enterprise and the STEP Project Global Consortium highlights how emotional attachment to one’s organization and the ability of next-gens to take risks and experience life outside the family business are critical elements of future business success
LONDON–(BUSINESS WIRE)–A Global Family Business Report from KPMG Private Enterprise and the STEP Project Global Consortium reveals that the sustained performance of family businesses can be attributed to several characteristics and next-generation leadership skills unique to their business models.

“The regenerative power of family businesses – Transgenerational entrepreneurship”, brings together insights from 2,439 CEOs and other leaders from top family businesses across 70 countries and territories, illustrating the common factors that make up the formula for family business resilience and regeneration: a strong entrepreneurial orientation, emotional attachment to their business and ambitious next-generation leadership seeking new experiences beyond the family business.

Among the top findings of the report: Next-generation successors are setting out on other career paths before returning to the family business, often using small amounts of family capital to help them learn and take risks. This approach is ultimately shown to be a contributor of long-term outperformance among the cohort of family businesses surveyed in the report.

Potential next-generation successors are being educated on how to take calculated risks on their own, which speaks to one of three key elements that today’s family businesses are relying on for success: entrepreneurial orientation. The KPMG Private Enterprise and STEP Project Global Consortium report found that the main keys family businesses are using to unlock their regenerative capabilities are:

Entrepreneurial orientation: This is a unique asset and essential for innovation and growth from generation to generation. The importance of keeping the founder’s entrepreneurial spirit alive is a major contributor to their continuous innovation mindset. Potential next-generation successors are being educated on how to take calculated and responsible risks and make judgments on their own, with small amounts of family capital enabling them to learn from firsthand experiences.

Socioemotional wealth: The family’s control and influence allows for quick decision making, and their “socioemotional wealth” is viewed as an essential endowment — one that the family values and protects. For many of the respondents, this is a measure of performance beyond financial wealth and one that is often difficult to replicate in non-family businesses.

Motivational leadership: Entrepreneurialism and socioemotional wealth go hand-in-hand as competitive differentiators, further strengthened by the impact of a transformational or charismatic leader.

Andrea Calabrò, Global Academic Director, STEP Project Global Consortium, says: “Success in family businesses is defined by both financial and non-financial objectives, such as control, transgenerational succession, social capital, emotional connection to the firm and reputation. Keeping and accumulating socioemotional wealth is an important part of a family firm’s success. The level of socioemotional wealth can change as family firms transition from one generation to the next, which is precisely the time to ensure the family’s control and influence, identification and emotional attachment to the firm are transitioned as well.”

Performance profiles: From peak performers to underperformers

The report also found that a family business’s leadership style can influence its performance. Based on inputs from the survey respondents, KPMG Private Enterprise and The STEP Project Global Consortium developed profiles of four family business types — from top performers to the most underperforming businesses — highlighting factors that have contributed to their regenerative power and financial, family and social results from generation to generation.

Key findings from the family business profiles are:

Higher performance from entrepreneurial and diverse orientations: Family businesses with a high level of entrepreneurial orientation, diversity and a charismatic leadership style showed higher financial and non-financial (social capital, emotional connection, etc.) performance than others. A commitment to continuous innovation and strong emotional attachments was also seen among the top performers.

Motivational leadership styles take the lead: The transformational leadership style — where leaders are changing basic values, beliefs and attitudes in an effort to motivate their “followers” to do more and perform beyond expectations — was the overall preference of family business CEOs across all regions, followed by the charismatic leadership style.

Motivational leadership can help drive more progress: The report found that motivational leadership can be ultimately rewarded with good financial, social and environmental progress, while also helping to build and foster familial loyalty and identification with the business.

Tom McGinness, Global Leader, Family Business, KPMG Private Enterprise, KPMG International, says: “According to the report findings, when both the level of entrepreneurial orientation and emotional attachment to the business are high, every aspect of the company’s performance is also high. Even though the family business success formula is based on their unique characteristics, there are also many lessons and practices for non-family businesses to take away. Adopting a holistic view of strategy and performance and giving equal weight to the business, employees and social outcomes is a great starting point. Every type of business can benefit from taking a moment to step back and look at their performance with a fresh mindset.”

Notes to Editors:

About the STEP Project Global Consortium

The STEP Project Global Consortium is a global applied research initiative that explores family and business practices within business families and generates solutions that have immediate application for family business leaders. STEP aims to be a leading global family business research project with an international reputation. The research insights are specifically drawn to be of relevance to developing new theoretical insights that can offer novel and valuable best practices recommendations to the business stakeholders and the practice community at large. Having a global worldwide orientation, STEP offers networking opportunities for researchers, family business owners and consultants coming from five continents.

Visit: thestepproject.org

About the KPMG Private Enterprise Global Center of Excellence for Family Business

As with your family, your business doesn’t stand still — it evolves. Family businesses are unique and KPMG Private Enterprise family business advisers understand the dynamics of a successful family business and work with you to provide tailored advice and experienced guidance to help you succeed.

To support the unique needs of family businesses, KPMG Private Enterprise coordinates with KPMG firms from around the world that are dedicated to offering relevant information and advice to family-owned companies. KPMG Private Enterprise understands that the nature of a family business is inherently different from a non-family business and requires an approach that considers the family component.

Visit: home.kpmg/familybusiness

About KPMG Private Enterprise

Passion, it’s what drives entrepreneurs, it’s also what inspires KPMG Private Enterprise advisers to help you maximize success. You know KPMG, but you might not know KPMG Private Enterprise. KPMG Private Enterprise advisers in KPMG firms around the world are dedicated to working with you and your business, no matter where you are in your growth journey — whether you’re looking to reach new heights, embrace technology, plan for an exit, or manage the transition of wealth or your business to the next generation. Working with KPMG Private Enterprise, you’ll gain access to a trusted advisor — a single point of contact who shares your entrepreneurial mindset. Access to KPMG’s global resources and alliance network can help you drive your business forward and meet your goals. Your success is KPMG Private Enterprise’s legacy.

Visit: home.kpmg/privateenterprise

About KPMG International Limited

KPMG is a global organization of independent professional services firms providing Audit, Tax and Advisory services. KPMG is the brand under which the member firms of KPMG International Limited (“KPMG International”) operate and provide professional services. “KPMG” is used to refer to individual member firms within the KPMG organization or to one or more member firms collectively.

KPMG firms operate in 145 countries and territories with more than 236,000 partners and employees working in member firms around the world. Each KPMG firm is a legally distinct and separate entity and describes itself as such. Each KPMG member firm is responsible for its own obligations and liabilities.

KPMG International Limited is a private English company limited by guarantee. KPMG International Limited and its related entities do not provide services to clients.

For more detail about our structure, please visit home.kpmg/governance.
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Daniel Caines
KPMG International
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daniel.caines@kpmg.co.uk