Luxembourg: Family Business In Europe: Talent Wars, Innovation, And Charging Ahead

Last Updated: 29 September 2016
Article by Louis Thomas

The Family Business Barometer seeks to show which trends are seen and foreseen within European family businesses. This year's edition turns up a number of interesting insights, such as the war for talent currently being waged, and innovation being the top strategy for developing sustainable growth. Another prevailing theme is planning for the future, with many respondents talking about formalising governance structures and passing management on to the next generation.

The survey also takes the industry's temperature on its confidence level, and the results are positive: 83% of the respondents expect growth in the coming year, with 54% having increased turnover in the previous year. This is good news considering the importance of this sector, which is about 14 million companies strong in Europe translating into some 60 million jobs in the private sector.

Read on for a brief of some of the key results of this year's survey, or check out the whole thing.

The war for talent and the crusade for innovation

The story of the present epoch seems to revolve around personnel: three years ago, locating key talent wasn't even amongst the top five concerns. Now it ranks at first place. For any business, of course, talent is no small factor in success—but since family businesses tend to rely more heavily on their employees, this challenge will be a particularly key one in this sector. Notably, family businesses tend to keep their people for longer than other businesses, so if the war for talent is being felt here it perhaps indicates the degree to which the global workforce is becoming more restless or more demanding.

Notably, other top concerns included political uncertainties and increased competition.

The other recurring theme within the survey is innovation, which comes foremost in respondents' strategies in 2016. It also ranks third in overall priorities over the next two years (being beaten only by increasing turnover and improving profitability), and of those planning new investments over half plan to do so in the name of innovation.

From these results we can see that family businesses in Europe are preparing for future growth by positioning themselves with the best people and the freshest ideas, products, and services.

Charging into the future

Indeed, we can observe family businesses' preoccupation with the future, as almost nine in ten respondents already have formal governance structures in place. Furthermore half of the survey participants already involve the next generation at the management level, and among the most-cited strategic items on next year's agenda are passing management and ownership on to younger hands. Another top strategy is appointing an external CEO.

These measures going into place, combined with the focus on new people and innovation, point to a forward-looking optimism that is not unfounded. In fact, it's supported by positive recent results: over half the companies reported that turnover is up, with a further 30% reporting that it has remained stable. More and more family business are expanding abroad, too, with 76% of our respondents telling us that they are in the international realm compared to 60% just three years ago. Overall, the growth rate within family businesses is more than double that of the European annual economic growth rate—5% per annum compared to 2%. And if you ask them (which we did), they are not interested in slowing down: a very healthy eight out of ten are expecting growth in the next year.

This growth, and its accompanying optimism, is most welcome in a European environment currently experiencing some trepidation. "As we have become accustomed to," says Jesus Casado, EFB Secretary General, "family businesses in times of political turmoil and uncertainty are the stabilising factor to our shared economies." Christophe Bernard, Global Head of KPMG's Family Business Practice, adds that "it is very encouraging to see that in spite of the recent upheavals in the European market, family businesses feel confident and optimistic about their future prospects and demonstrate positive performance."

The survey is the fifth of its kind, and collected data from 959 completed questionnaires sent to participants spanning 23 countries.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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