Barry McCall talks to KPMG’s Olivia Lynch about how Irish family businesses will pave the way for economic recovery post Covid-19
KPMG Private Enterprise joined forces with the STEP Project Global Consortium to produce the Global family business report: COVID-19 edition last month. KPMG Private Enterprise partner Olivia Lynch spoke to Decision about some of its key findings for Ireland and its family businesses.
Ireland’s 160,000 family businesses are well placed to play a leading role in Ireland’s post-Covid economic recovery, according to Lynch. “Family businesses employ almost 1 million people and account for two-thirds of Irish businesses. They are part of the economic and social bedrock of Irish society and will play a key role in leading the recovery.”
While 68 percent of Irish respondents to the survey said revenues had dropped due to Covid-19 and 15 percent said employment had fallen, this was not unexpected given the sectoral spread of the companies involved, she claims.
“It’s clear that the impact on Irish family businesses has been substantial, which is perhaps unsurprising given the concentration of these businesses in some of the hardest-hit sectors including retail, food and agri, and leisure and tourism,” says Lynch.
An interesting finding related to labour costs. While 35 percent of Irish companies focused on reducing them, they indicated that they favoured placing employees on furlough rather than implementing a hiring freeze or reducing pay.
“This shows the government support measures have been working,” Lynch contends. “These supports have been keeping employees connected with employers and will hopefully bring employment levels back up as we come out of Covid. There is no doubt that they have also contributed to keeping family businesses in Ireland afloat, but what comes next in supporting the re-opening of our economy will be critical for their long-term survival.”
Reducing operational costs or planned investment was favoured by just 34 percent of Irish firms. “This bodes well for Irish business. Now is the time to invest and innovate. What we are seeing with family businesses is that they are talking about scaling, expansion and diversification once again. The global finding that more than 70 percent of families maintained their R&D investments and continued to launch new products and services throughout the pandemic is also very positive. This is very encouraging for the future.”
She believes the core strengths of the Irish family business have been coming to the fore during the crisis.
She believes the core strengths of the Irish family business have been coming to the fore during the crisis. Indeed, Irish family businesses are particularly impressive in the way they have stood the test of time with almost half of the respondents (46%) being the third generation and a further 13 percent being the fourth generation. This contrasts sharply with the global picture where 42 percent of the businesses surveyed were first-generation and only 14 percent were the third generation.
And longevity is important, according to Lynch. “The global findings show that multi-generational firms are 45 percent more likely to deploy a business transformation strategy than single-generation family firms, and 42 percent of family businesses are more likely to deploy a business transformation strategy than non-family firms. This is a standout finding for me. The transformation agenda also includes changing and accelerating governance in light of the pandemic. Agility will be key for businesses emerging from this crisis, especially those who are gearing up for our economy re-opening in the coming months. We have seen family business embrace the concept of pivoting both in terms of new strategies to react immediately to the impact on business but also proactively moving to adapt and transform in order to thrive in the future.”
Another welcome but not altogether surprising finding highlighted the openness of the Irish family business to broaden their horizons. “It is interesting to note in the survey that Irish family businesses were more likely to look externally than their European and US counterparts for new collaboration opportunities with customers and suppliers in response to the crisis.”
“We have seen family business embrace the concept of pivoting both in terms of new strategies to react immediately to the impact on business but also proactively moving to adapt and transform in order to thrive in the future.”
Her own experience with clients combined with the survey results points to a positive outlook. “There is clear optimism out there. Family businesses have some unique characteristics that will help them lead the Irish recovery. Among these is their longer-term more patient mindset, the involvement of multi-generational owners, and having the experience of older generations to call on but also having new generations bringing things like digital solutions, diversification, ESG agenda to the table.”
The Covid-19 impact hasn’t been entirely negative, she adds. “One of the unexpected benefits of the pandemic and the lockdowns have been the gift of time. The slowdown has given family businesses the time to take stock of what they are, to explore new products and markets, to implement digital solutions, and to focus on their governance and ownership structures and succession plans. This will help many family businesses to emerge from the crisis in a position of strength.”
That pause for thought has allowed them to draw upon innate resources. “We often say that resilience is embedded in the family’s DNA. The experience passed through generations is one of the things that make family businesses unique and positions them strongly to make a recovery from this period of crisis and economic uncertainty.”
The government will still have a critical role to play in supporting family businesses as the economy reopens, Lynch points out. “There is the potential for businesses to face a financial cliff edge as liabilities to the State and lenders fall due. In this light, there is a need for Government to continually reshape the suite of supports for businesses as circumstances evolve. Fiscal policy will need to move from serving the needs of today to fuelling the recovery of tomorrow and the cause of family businesses should be at the heart of this.”
The government will still have a critical role to play in supporting family businesses as the economy reopens
Family businesses will remain in the vanguard of the Irish economy, she concludes. “Regardless of their size, age or industry sector, Irish family business has successfully come back from the initial impact of the pandemic through their sense of community, purpose and patience and are now in a strong position to lead the economic recovery.”