According to Deloitte’s Global Family Business Survey 2019, striking the right balance between short-term initiatives and long-term goals will be the key differentiator for those that succeed.
Among companies in Luxembourg, digital transformation was listed as one of the top three priorities for family businesses over the next 12 months, with 37% of respondents outlining its importance. The other two priorities were financial performance (74%) and the development of new products/services (47%).
“With the current dynamic and ever-changing business environment, family-run companies have the opportunity to act in meaningful ways to strengthen their position. Focusing on a digital transformation will assist these businesses in shaping strategies to actively deal with the disruptive changes that often lie on the horizon,” said Luc Brucher, Partner Deloitte Private Luxembourg.
Family businesses tend to lean toward a long-term view rooted in shared values, vision, and culture, which can help them maintain family control over years. However, family ownership, by itself, does not guarantee business longevity.
In the survey, Deloitte interviewed 791 executives from 58 countries about the challenges and opportunities they are currently facing. Retaining family ownership is one of the key elements of their long-term goals, yet only 41% feel confident in their plans for succession.
Innovation and agility, keys to success
When asked about the drivers for stability and future success of the business, executives tend to point to agility (61%) and innovation capabilities (39%), even though the possibility of a negative outcome and a reduction on family’s wealth is what keeps some of them from fully embracing their potential.
While some companies are committed to expanding their business by industry or geography, only 26% saw diversification as a way to sustain the business over the next 10 to 20 years. On the contrary, Luxembourg-based family businesses feel more ready to meet the challenges of the future as a large majority of the survey respondents (79%) feel confident about their strategy for the next 10-20 years.
“In Luxembourg, family-owned businesses tend to be resilient and agile. On a global stage, Luxembourg-based family companies stand tall with their forward-planning and readiness for the future,” said Mickael Coq, Director Deloitte Private Luxembourg.
Family legacy and loyalty
Maintaining ownership, ensuring the legacy, and preserving family capital are three of the main challenges for every family business, but many have not yet created a formal succession plan. For instance, despite 68% of executives saying they intend to keep the business in the family, only 26% have a stated plan for the CEO position—and even fewer have this for other C-suite positions.
Moreover, less than one-third of respondents believe their families share a common vision on the business’s future development. Furthermore, the same amount of respondents would be willing to trade at least some measure of family control over the business for even greater long-term financial success.
What they should keep in mind is that selling minority stakes to other family businesses or family offices can be used as an alternative way to attract capital, while remaining true to its vision as a family-owned company.
According to the survey, 37% of Luxembourg respondents cited that the loyalty of the family business’ workforce plays a significant role in the health and long-term goals of the company.
“Organising succession is not an easy task. As an emotional subject, succession planning needs to be carefully tailored to every situation as each family business has its own values, vision and goals. It is a process which needs to be anticipated and prepared for in order to design a business structure which meets both family and commercial objectives, and helps achieve strong business performance whilst ensuring the family remains committed and strong through the generations,” commented Georges Kioes, Partner Deloitte Private Luxembourg.