Honoring legacy but continuing to innovate drives family business success

London, 30 April 2015

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The world’s most successful family businesses are those that can integrate practicality and innovation, strategy and strong commercial acumen, along with nurturing and caring for the family. Those that do this create a lasting legacy of entrepreneurial success, long-term growth and family unity. This is according a new report launched by EY and Kennesaw State University’s Cox Family Enterprise Center, Staying power: how do family businesses create lasting success?, which surveyed 25 of the largest family-owned businesses in each of 21 global markets.

The report provides insight on the impact of family businesses globally by focusing on seven success factors: succession; women in leadership; governance; communication and resolving conflicts; branding; corporate social responsibility, philanthropy and sustainability; and cybersecurity. It also provides insight into the noteworthy practices, characteristics and success factors that make these family businesses successful and long-standing.

Family businesses are fit and strong
The survey findings show that successful family businesses remain entrepreneurial and committed to innovation, even into their second generation and beyond. And they aren’t complacent – they are keeping their eyes set on growing by investing in new talent, increased production and better systems.

Peter Englisch, Global and EMEIA Leader, EY Family Business Center of Excellence, says:

“Family businesses are vital to the global economy. They account for more than two-thirds of all companies globally, count many leading household names among their number and provide 50% to 80% of all employment, so a survey like this, that allows us to discover the noteworthy practices and characteristics of the largest among them, is hugely valuable. There is a clear picture emerging of what it takes to succeed in the long term: care for the family allied with first-class corporate governance and practices.”

The survey results show clear consistency in how these top family businesses are run.

  • 87% have clearly identified who is responsible for succession
  • 70% are considering a woman for their next CEO
  • 90% have a board of directors
  • 90% have regular family or shareholder meetings to discuss business issues
  • 76% refer to themselves as a family business in their branding
  • 81% engage in philanthropic activities
  • 83% expect spending on cybersecurity to increase

Carrie Hall, Americas Leader, EY Family Business Center of Excellence, says: “Overall, the companies surveyed manage to remain entrepreneurial and committed to innovation. Even the oldest family business surveyed, in its ninth generation, does so. What’s more interesting is that these companies honor their legacies without being stuck in the ways of the past. Given that 64% of the family businesses surveyed predict that they will expand into other markets in 2015, it is apparent they are hungry for growth. To accomplish it, they are investing in new talent, increased production and better systems.”

Seven keys to success according to the report:
Successful family business embrace succession: Eighty seven percent of the respondents have clearly identified who is responsible for succession, implying that processes to handle traditional transitions as well as potential emergencies are well in place.

Family businesses lead the way with women in leadership positions: Globally, 70% of respondents are considering a woman for their next CEO. They average five women in the C-suite and four being groomed for top leadership positions. More than half (55%) have at least one woman on their board.

In governance, family is first: The majority of respondents (90%) have a functioning board of directors and most of those boards are made up of family members. Nearly half (48.6%) are exclusively family members, and only 28% have an equal number or greater of non-family voting members on their boards.

Healthy communication and healthy conflict lead to a healthy business: Participants in our survey report that they care deeply about their family members (81%), 90% have regular family or shareholder meetings to discuss business issues, 70% have regular family meetings to discuss family issues and 64% have a family council that meets regularly.

Family business branding builds trust: Seventy-six percent of respondents report they refer to themselves as a family business in their advertising, websites, social media, press releases and/or other promotional materials.

Sustainability is valued by family businesses: Survey respondents value and implement corporate social responsibility (CSR) and sustainability practices with over 50% reporting a high commitment to CSR practices, and an impressive 81% engaging in philanthropy. In addition, 85% have a code of ethics, 47% have a family foundation, and 37% report that they will increase their philanthropic activities in 2015.

The specter of cyber risk looms large: The majority (90%) say they are confident or very confident that their business is effectively addressing cyber risks. Most of the participants (83%) report they expect spending on cybersecurity to increase. Some family business leaders (25%) don’t know how cyber risks affect their businesses. Among those that are enlightened about cyber risk, 55% believe the risk is moderate to high.

Joe Astrachan, PhD, Professor of Management and Entrepreneurship, Kennesaw State University, said: “The characteristics and practices of large, long-lived family businesses serve as a model for other family businesses as well as other companies that aspire to maintain an entrepreneurial spirit, innovate and grow consistently.”

To view the full report, please visit ey.com/stayingpower.

- Ends -

Notes to editors
About EY

EY is a global leader in assurance, tax, transaction and advisory services. The insights and quality services we deliver help build trust and confidence in the capital markets and in economies the world over. We develop outstanding leaders who team to deliver on our promises to all of our stakeholders. In so doing, we play a critical role in building a better working world for our people, for our clients and for our communities.

EY refers to the global organization, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. For more information about our organization, please visit ey.com.

This news release has been issued by EYGM Limited, a member of the global EY organization that also does not provide any services to clients.

About the survey
This report is based on survey data gathered from a database of 2,400 of the world’s largest family businesses. This database comprises the largest family businesses from the top 21 global markets — Australia, Belgium, Brazil, Canada, China, France, Germany, the Gulf Cooperation Countries (Qatar, Bahrain, Kuwait, Oman, Saudi Arabia and the United Arab Emirates), India, Indonesia, Italy, Japan, Mexico, the Netherlands, Russia, South Korea, Spain, Switzerland, Turkey, the UK and the US. Valid Research, an independent research institute in Germany, used a questionnaire and conducted 1,000 phone interviews in the specific country language with senior ranking family business leaders. Based on the number of companies contacted to achieve our desired sample size, we achieved a 42% response rate. This report takes into account the responses of the 25 largest family-owned businesses in each of the markets.

About the EY Global Family Business Center of Excellence
Our Global Family Business Center of Excellence, the first of its kind, is designed to support family businesses, their owners and their managers, wherever they operate in the world. The Center brings together advisors from the EY global network to share knowledge and insight to address family business challenges and provide seamless services for internationally based family-owned companies. We know that each family business is unique, yet successful family businesses also have much in common. Understanding these success factors and taking advantage of our knowledge underpins what we call the “Growth DNA model of family business.”

www.ey.com/familybusiness

About Kennesaw State University
Kennesaw State University is the third-largest university in Georgia, offering more than 100
undergraduate, graduate and doctoral degrees. A member of the University System of Georgia, Kennesaw State is a comprehensive university with more than 32,000 students from 130 countries. In January 2015, Kennesaw State and Southern Polytechnic State University consolidated to create one of the 50 largest public universities in the country. 
kennesaw.edu

About the Cox Family Enterprise Center
Since 1987, the Cox Family Enterprise Center at Kennesaw State University has been dedicated to the education, recognition and research of family businesses. As one of the first university-based centers of its kind, the Center remains focused on connecting people, ideas and knowledge to create a dynamic community to transform the family business ecosystem and further economic development.