Family Businesses leveraged their ‘patience capital’ during COVID-19 and now ready to lead the recovery
Family business with their long-term mindset and resilient family members places them in a key role to lead Australia’s economic recovery.
Crucially, during the pandemic their unique structure meant families could draw on support from multiple generations, leveraging past experiences of older generations to manage critical challenges while using the insights of younger members to drive modernisation.
These are some of the insights from our latest report co-authored with the STEP Project Global Consortium, Mastering a comeback: How family businesses are triumphing over COVID-19
Globally, three strategies to maintain business continuity stood out. Social responsibility, a commitment to business transformation and patience.
During COVID-19, family businesses took steps to address the impact not only on operations but on the welfare of society as a whole and the needs of all their stakeholders including employees, customers, suppliers and local communities. On a scale more closely aligned with Australia, the pandemic saw just 7.95 percent reduction of employees in family businesses across Asia-Pacific.
The willingness to quickly change direction in response to the volatile business environment stood out among family businesses; businesses with multiple generations were 45 percent more likely to implement a business transformation strategy than single-generation family firms. Successful restructuring in Asia-Pacific businesses resulted in 87 percent seeing their revenue increase or remain on par with pre-COVID times. Domestically, results showed business transformation played a large part in Australian family businesses successfully dealing with the fall out of the pandemic.
Rather than a reactive short-term approach to the pandemic family businesses leveraged their ‘patience capital’; taking time to fully understand the impact of COVID-19 both on their business and others in their industry.
There was also renewed focus on protecting succession plans and a long-term future for the next generation. Overall, they focused on building plans for the long term, rather than just mitigating the short-term impact of the pandemic.
Locally, family members drew on intergenerational knowledge and, in turn, 70 percent of families reported they maintained their R&D investments and continued to launch new products and services throughout the pandemic. The pandemic opened up opportunities for young, tech-savvy family members to introduce digital technology solutions that streamlined their business operations and launched a host of new products into the market.
As we look at a post-COVID future, maintaining a focus on governance and implementing meaningful KPIs, to track performance and productivity, is vital for the future success of Australian family businesses.
Unregulated private companies such as Family Businesses are not subject to the same regulatory and legislative direction as ASX-listed companies and therefore can act with a higher level of autonomy and flexibility. However, this means that they may not necessarily capture the benefit of diversity by having independent directors on board.
Typically, these entities may appoint friends as board members and resist the unfamiliar. Rethinking the composition of their board can benefit the whole sector.
Overall, there are many lessons for family businesses from the COVID-19 experience. What is clear is they have shown resilience, risen to the challenge and applied the learnings from the pandemic. Continued application of these and implementing the changes which saw the sector strive through the pandemic will be the key to family businesses continuing to lead the way in Australia’s ongoing economic recovery.
Read the full report.