Family businesses grow steadily amid economic slowdown: E&Y


New Delhi:

Majority of the family businesses worldwide have managed to grow steadily with many "re-inventing themselves" amid slow economic recovery and European debt turmoil, according to an Ernst & Young  survey.

The survey of 280 family businesses, including those from India, showed that most successful family firms have always adapted to new realities, re-inventing themselves as times change.

"Family businesses demonstrated resilience and ability to grow steadily against a backdrop of slow economic recovery and euro zone crisis," global consultancy E&Y has said.

Businesses from about 33 countries, including India, participated in the survey, which was conducted earlier this year. About 43 per cent were family businesses with a workforce of more than 1,000 employees.

"At least 50 per cent of the respondents considered the economic environment as the biggest risk factors for their businesses followed by rising costs and acute competition.

"Two-fifths of the respondents mentioned the need to adapt to new business conditions followed by new or different skill requirement as key factors motivating change in management structure," E&Y said.

Innovation topped the agenda of many family businesses that participated in the survey, followed by plans to invest in new markets and M&A related investments.

On incentives to retain non-family executives with a family-run firm, respondents said the preference was to use non-monetary incentives such as offering executives greater levels of involvement in the decision-making process.

The survey found that attitude towards talent management was a key factor between best-and worst-performing entities.

"Twenty three of best performers surveyed thought talent management important to their future success, compared to 16 per cent of the worst-performing businesses who didn't," it said.

One in six firms surveyed said bringing non-family members into key positions had been a motivator of governance change over the past three years.

Half of the respondents preferred offering greater levels of involvement in the decision-making process to bind
non-family executives to the firm, the survey said.

"The best performers also made more use of deferred remuneration, while low-performing businesses were far more likely than high-performing ones to offer executives rates of remuneration above industry standards...," the report said.

E&Y collaborated with the the Family Business Network International (FBN-I) and Credit Suisse for the survey. "Family businesses in rapid growth economies were also far more likely to be involved in philanthropy or impact investing, with two-thirds compared with just under two-fifths in advanced economies," it said.

Story first published on: November 18, 2012 12:07 (IST)

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