This important advisory market segment is increasingly being impacted by a ‘war for talent’, according to the European Family Businesses (EFB) and KPMG Enterprise European Family Business Barometer.
The 2017 barometer found that a family businesses’ ability to attract and retain skilled individuals has become their number one concern.
More than four in 10 (43%) of the family business representatives surveyed named recruiting skilled staff as one of their businesses’ major issues, coming ahead of increasing competition (37%) and declining profitability (36%) in second and third place.
The proportion citing the recruitment of talent as a key concern has risen from 37% last year and 33% in 2015.
With almost eight in 10 (78%) family businesses across the continent employing external directors, representing a steady incline since the barometer first asked the question in 2015, the issue of attracting skills is increasingly pertinent from the bottom to the very top of family businesses.
Getting out of the gene pool
Ken McCracken, KPMG’s UK head of Family Business Consulting, said: “The culture and values that become apparent to employees within many family businesses, once they have joined, means they tend to perform strongly when it comes to retaining talent.
“However, as their appetite to tap into the skills that exist outside of the family gene pool grows, in a high employment economy, their experience of the war for talent intensifies as they compete to attract staff with sought after skills.
“Given the vast majority (87%) of the families behind the businesses are committed to maintaining family ownership, and have a potentially wide pool of relatives amongst whom to share dividends, the remuneration packages on offer to attract talent can be more limited than businesses with other ownership forms. Share schemes and option plans tend to be off the table.
“So, it’s important that they effectively build and communicate their value proposition as an employer; what it means to be a family business and why it’s a good thing to work for one.”
Ramon Pueyo Viñuales, partner in charge of Family Enterprise, KPMG Enterprise in Spain, added: “Big global giants and multinational companies are actively competing for talent with family businesses across Europe.
“In order to compete, family businesses need to explain what it means to be a family business and why it’s a good thing to work for one. Rather than avoiding the press and downplaying public visibility, they should speak up about what they do. They should highlight the benefits of joining a family business.”
Optimism and growth
Despite these issues, 41% of family businesses grew their headcount in the last year and only 2% said they felt negative about their business’s outlook for the next 12 months.
- 71% reported feeling confident or very confident in their business’ prospects for the next 12 months and a quarter are neutral.
- 57% reported increased turnover over the past year, while 27% maintained revenues and 13% saw a reduction.
- Of those that experience an increase in revenue, 74% of the business leaders plan to reinvest it.
Elizabeth Bagger, executive director at the Institute for Family Business, commented: “This latest barometer gives important insights into the challenges family firms are facing and some of the barriers to them achieving their ambitions.
“Despite these challenges it is encouraging to see how many families have plans in place to grow their business, including reinvesting in their business, and exploring new markets. These findings reflect the dynamic, innovative and ambitious family firms we work with every day.”
Succession
The survey also looked at efforts to balance family and business, as well as issues around succession planning.
McCracken said: “I’m pleased to see such a majority placing value on preparing a successor and, as such, that half have the next generation in management roles while one in 10 are clear on their aim to appoint a non-family chief executive in the near future.
“However, eight in 10 are without a chief executive succession plan which suggests there is work to do in many cases. I do think there is still an overly blurry line about the distinction between being a family owner and being a family manager. Deciding on this point can be a pivotal moment for a family at a crossroads.”
UK snapshot
The responses from UK family businesses also suggest that they are less engaged with exporting than the European average.
Less than half (44%) are without any overseas activity; a figure that’s only 24% across the continent.
Appetite to change this exporting gap is also lacking according to the UK sample, with only 26% planning to increase their activity levels abroad, compared to 44% pan-Europe.
