Transform to Build Trust Report Highlights:
- 71% of family businesses reported growth in their latest financial year, with 43% reporting double-digit growth and 77% reporting that they expect to grow in the coming two years.
- Family businesses with a communicated ESG strategy are more trusted by customers (62% vs. 49%) than those that do not, yet 67% of family businesses put little/no focus on Environmental, Social and Governance (ESG).
- Family businesses with diverse boards (46%) have a slight advantage of those that do not (43%) in terms of double-digit growth this year.
- Two thirds of family businesses say employee trust is essential – yet only 36% say they are focused on attracting and retaining talent.
Family Businesses See Largest Growth Increase in 15 Years
LONDON, 2023 /PRNewswire/ — 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 Environmental, Social and Governance (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 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 business on social issues, and this is reflected in the growing number of family firms who 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 purpose is being tracked effectively, with 46% 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 & 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 focused 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 focused 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).
About PwC: At PwC, our purpose is to build trust in society and solve important problems. We’re a network of firms in 152 countries with nearly 328,000 people who are committed to delivering quality in assurance, advisory and tax services. Find out more and tell us what matters to you by visiting us at pwc.com. PwC refers to the PwC network and/or one or more of its member firms, each of which is a separate legal entity. Please see pwc.com/structure for further details. © 2023 PwC. All rights reserved.
PwC’s 11th Global Family Business Survey: FBS is a global market survey among key decision makers in family businesses within a number of PwC’s key territories. The survey seeks to understand the key issues facing family businesses. The survey team conducted 2,043 interviews with family businesses, averaging 25 minutes between 20 Oct 2022 and 22 Jan 2023 across 82 countries. More information is available at pwc.com.
Contacts Mike Davies, Director, Global Corporate Affairs and Communications, PwC UK: firstname.lastname@example.org
Dan Barabas, Manager, Global Corporate Affairs and Communications, PwC UK: email@example.com
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Wow, this Blog highlights some truly exciting trends in the world of family businesses! It’s fascinating to see how these businesses are experiencing significant growth rates on a global scale. The fact that family businesses contribute such a substantial share to the global economy is impressive and speaks to their resilience and adaptability. It’s great to see that they are thriving and succeeding in an ever-changing business landscape. This article serves as a reminder of the importance and impact of family-run enterprises in driving economic growth. Kudos to all the hardworking families and their entrepreneurial spirit!
Exciting news! The growth rates of family businesses have surged worldwide. This bodes well for the global economy and entrepreneurial spirit.
I’m not surprised….the big companies get worse & worse every day. Makes me think customer service and basic best practices are a thing of the past but then I SHOP SMALL and my faith in business is restored. SHOP SMALL THEY EARN IT!!!! It isn’t worth saving a few pennies to be used and abused by big biz. It just isn’t. NOPE!!!