Hyderabad: A latest report from the STEP Project Global Consortium and KPMG finds that the unique structure of family businesses empowered them to respond to the impact of Covid-19. The study found that the involvement of the family and their long-term mindset has enabled them to show resilience, placing them in a key position to lead the economic recovery.
The report, titled– ‘Mastering a comeback: How family businesses are triumphing over Covid-19’, includes insights from nearly 2,500 family businesses and more than 500 non-family businesses, across 75 countries. Thomas Schmidheiny Centre for Family Enterprise, Indian School of Business (ISB), being the only member from India conducted the survey in India.
Dr Nupur Pavan Bang, associate director, Thomas Schmidheiny Centre for Family Enterprise, said, “Lower per cent of companies in India (29 per cent) took actions to reduce/eliminate labour costs when compared to the global average of 36 per cent. Emphasis on cost reduction through cutting operating costs, cut down on investments, restructuring, deferring payments and expenses, and reducing the top management team’s compensation was more in India compared to family firms globally.”
Family businesses took steps to address the impact of the pandemic not only on their family and business, but on the welfare of society as a whole and the needs of all their stakeholders. Family businesses were found to be 42 per cent more likely to implement business transformation strategies when compared to non-family businesses during the pandemic.
Family businesses with multiple generations in the firm were 45 per cent more likely to implement a business transformation strategy when compared to single-generation family firms. Long-term mindset of family businesses has enabled them to leverage their patience to understand the full impact of Covid-19 on their business and others in their industry.
Family businesses constitute the earliest and most common business model in the world and range from local, small businesses to some of the world’s biggest companies such as Wal-Mart and Heineken.
The report finds businesses led by a family-CEO and with high family involvement were more likely to adopt a social responsibility strategy. In the cases where a family business is led by a non-family executive or with lower family involvement, there was a higher likelihood that the business leader made difficult decisions to soften the impact on the business.
Families’ abilities to leverage the past experiences of older generations represent a crucial component of their reactive pivots (deferring or reducing executive pay). As time went on, the focus shifted to proactive pivots (streamlining their operations by implementing new technologies), which benefited from the knowledge and insights of multiple generations, particularly the innovation of younger members.
Being able to draw on intergenerational knowledge and experience meant that 70 per cent of families reported that they maintained their R&D investments and continued to launch new products and services throughout the pandemic.
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