Europe’s family businesses are confident about the future but must become more agile, innovate faster and attract top talent to remain competitive and continue to grow. These are among the key findings of the latest European Family Business Barometer, which surveyed 1,576 family business executives in 26 countries across Europe, including Romania, published by KPMG Enterprise and European Family Business (EFB).
The European Family Business Barometer is the seventh survey of Europe-based family businesses and reveals that family businesses continue to build on the momentum of past strong economic growth.
“We’re seeing good progress this past year as family businesses are preparing for growth. The next step will require scaling their operations, which is a delicate and crucial operation,” says Jonathan Lavender, Global Chairman, KPMG Enterprise & Co-Chair Global KPMG Enterprise Family Business. “The business world is globally connected. As European family businesses prepare to do business on the world stage, they will find themselves going head-to-head with companies from around the world. They have to factor increased global competition in their growth and expansion plans.”
Investing in innovation and people to fuel growth
Europe’s family businesses are planning for growth. Almost one quarter (23%) plan to expand and diversify their products to drive future growth and more than half (54%) plan to expand into new markets.
As René Schöb, Partner, Head of Tax & Legal KPMG in Romania, explains: “Family businesses are showing resilience to external pressures and challenges, focusing on talent and innovation as key assets in growing the business and pursuing new opportunities. The rising importance of these two success factors is reflected in the high levels of investment expenditure, more than three-quarters of respondents ranking these two issues in their top-three priorities. It is reassuring to see that the family businesses surveyed remained confident and optimistic about their outlook for the future and continue to make their crucial contribution to the European economy.”
One of the key strategies for growth is embracing innovation. Respondents are capitalizing on past growth and reinvesting profits into the business. The majority (86%) are investing in the core business, 83% are investing in innovation and technology, and 81% are investing in recruitment and training. This is also a direct response to the top two challenges facing respondents: the skills shortage (53%) and the rising cost of labor (36%).
In this increasingly digital and technology driven world, Europe’s family businesses also recognize the need for new skill sets and capabilities among leadership. One third of respondents are considering hiring an external CEO.
“As family businesses grow, it becomes increasingly important for them to reach out beyond the family, to find the additional skill sets they need. This is particularly true in the case of highly specialized roles in areas ranging from digital innovation through to key roles at the production or assembly line level. Unfortunately, these specialized roles are increasingly difficult to fill. The growing skills gap must be urgently addressed by policy makers.” – Jesús Casado Navarro-Rubio, Secretary General, European Family Businesses
With Brexit, growing protectionism and contentious trade talks front and center on the world stage, it’s not surprising that more than one-third of respondents (36%) cite political uncertainty as a top concern and challenge. Still, Europe’s family businesses are navigating their way through, taking a long-term approach and being proactive in their talent acquisition and streamlining decision making to ensure that they have the agility to respond to changes in real time.
About the Barometer
The European Family Business Barometer is based on the responses of an online survey from over 1,500 questionnaires which were received from family businesses across 26 European countries from 7 May to 7 July 2018.
KPMG is a global network of professional firms providing Audit, Tax and Advisory services. We operate in 154 countries and have 200,000 professionals working in member firms around the world. The independent member firms of the KPMG network are affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. Each KPMG firm is a legally distinct and separate entity and describes itself as such.
KPMG in Romania and Moldova operates from six offices located in Bucharest, Cluj-Napoca, Constanta, Iasi, Timisoara and Chisinau.