Family businesses in Australia have outperformed other organisational models in riding out the disruptions caused by the COVID-19 pandemic, due to the highly valued quality of resilience. This has strong implications for the country’s economic recovery, due to the sheer number of family owned businesses in Australia and their influence on the communities where they operate.
Family businesses make up over 70% of Australian businesses and employ approximately 50% of the Australian workforce, who tend to spend their wages locally, supporting community financial stability.
Global research by Credit Suisse supports this, showing family businesses outperformed their conventional counterparts in 2020 by more than 5% for the Asia-Pacific Region, excluding Japan. In addition to being more profitable, the research found that family businesses have “above average defensive characteristics” which make them more resilient and able to keep performing during times of market stress.
According to data collected for the 2013 Joint Parliamentary Committee Report into Family Businesses in Australia these characteristics which distinguish them from other businesses include
- a risk averse, long-term approach
- flexible decision making
- greater commitment to retaining staff
- significant contribution to the community in which they operate
- higher productivity.
Add to this list other factors such as perceived trustworthiness, the ability to access support from family members spanning multiple generations to leverage learnings drawn from life experience in managing critical challenges, in combination with youthful drive to innovate to remain competitive, another recent KPMG report says.
Family business strategies for survival
The same report identifies three key common family business strategies for maintaining business continuity during the pandemic: social responsibility, commitment to business transformation and patience.
Social responsibility
In addition to addressing the impact of COVID-19 on their operations, family businesses were more likely to look at social implications such as the needs of their stakeholders, customers, local communities and employees, particularly in regard to staff retention.
Business transformation
This breadth of scope in management, and autonomy as non-ASX listed companies, enable family businesses to pivot more effectively, with the KPMG findings showing that businesses with multiple generations were 45% more likely to implement a business transformation strategy than single generation companies. Successful restructuring has enabled Asia-Pacific family businesses to retain or increase revenue levels.
Patience
Instead of responding reactively to lockdowns, supply chain delays and infection/isolation staff absenteeism, family businesses were more likely to take the time to fully understand and assess the effects of the pandemic on their operations, supply chain and industry before implementing longer term strategies to deal with them.
Taking the long view for family business success
Long term planning is one of the important points of difference for family businesses and the increasing costs of doing business are a major consideration for almost half of those canvassed in PwC Australia’s Family Business Survey 2021.
An overwhelming majority (83% of respondents) intended to expand into new markets and/or increase or diversify their products over the next two years. The second highest priority was to increase their skills base and to develop digital capabilities and make higher use of available tools to remain competitive.
Succession planning is an area of greatest divergence, with many businesses intending to pass majority shareholding on to another family member, others thinking of selling to a third party but far too few having robust and documented plans for succession.
The role of insurance in supporting the family business management model
Insurance provides the practical dimension of successfully managing contingencies or unexpected eventualities. From protection against delays or non-payment to covering the costs of a key person becoming seriously ill, insurance is a key aspect of enabling business agility by ensuring operational liquidity across a range of risks. Make it part of your family business resilience.
When it comes to looking after your enterprise, don’t hesitate to call on our expertise. Gallagher can advise on insurance tailored to your family business’s needs. Call 1800 240 432 to chat about your particular needs.
Written by Roz Shaw
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Written by Roz Shaw | Gallagher National Head of Transport After a 30-year career in running her family’s transport business Gallagher National Head of Transport Roz Shaw moved into an equally high-level role in insurance, drawing on her industry experience and knowledge of family business dynamics. |
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Disclaimer The views expressed in this content are those of the author, who is also responsible for any errors and omissions. Family Business Australia and New Zealand provides this article for your information only. The content of the article should not be taken as advice. If you wish to explore this topic, please consult an advisor who you consider to have the expertise to provide specific advice in relation to your family business. |
