A PwC study has concluded that UK family businesses will need to ‘toughen up’, and show greater ambition in order to survive in an increasingly competitive global marketplace.
The report, entitled ‘The Family Factor: Professionalising the UK Family Firm’, surveyed decision makers from family businesses in over 40 countries, including nearly 400 firms from the UK.
The findings indicate clearly that UK family businesses need to be more ambitious, with fewer than one in ten planning aggressive expansion within the next five years. This compares to 57% of Chinese businesses, and 40% of those from the Middle East and India. Only 16% of an average UK family business’ turnover comes from foreign sales, which compares poorly to the 25% global average. Furthermore, only just over half of UK family firms see innovation as a key challenge over the next five years; some way short of the 64% recorded globally.
It’s not just in terms of ambition that UK businesses are falling behind, but in terms of organisation as well, as succession planning appears to be low priority. Whilst nearly half of UK family businesses stated that they planned to hand their business onto the next generation, only 13% of businesses surveyed had a succession plan in place. Furthermore, less than a quarter see the need for bringing in professional management to ensure a smooth and successful transition.
From a HR point of view the survey highlights the problems that arise with a lack of basic infrastructure, with many respondents stating that their business needs to ‘professionalise’ to survive. As one of the business owners surveyed said, “Family businesses generally fail for family reasons”. In order to ensure responsible and effective management, these companies need to put formal structures in place that govern how the family engages with the business.
Many of the respondents surveyed stated that recruiting talented staff was a problem; however PwC themselves noted that this may be due to potential staff failing to see opportunities for career progression in family firms. Also, without professional processes and practices in place, these businesses may not be an attractive employment prospect to candidates.
The report makes disconcerting reading for small, family-led UK businesses. They will need to improve their management processes and strategy if they are to stay ahead of the ‘hungry’ new competitors, both at home and abroad.