Bahrain11 November 20153 min read

‘Family businesses heading ï¿¼ï¿¼ï¿¼ ï¿¼ï¿¼to major strategic overhaul’

By Tahir Haneef/DTNN tahir@dt.bh. As much as 41 per cent of the family businesses are getting ready for a major strategic overhaul in the next one year, including induction of the next generation and hiving of business divisions, claims Christophe Bernard, partner, Global Head of Family Business, KPMG, in an inte

Editorial Team Legacy

Published 11 November 2015, 8:00 · Updated 21:42

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‘Family businesses heading ï¿¼ï¿¼ï¿¼ ï¿¼ï¿¼to major strategic overhaul’

As much as 41 per cent of the family businesses are getting ready for a major strategic overhaul in the next one year, including induction of the next generation and hiving of business divisions, claims Christophe Bernard, partner, Global Head of Family Business, KPMG, in an interview with DT News.

The findings will be presented in a study to be released by KPMG on November 17.

“Family businesses are perceived as old fashioned by many as families want to keep their business operations a secret. Also, the fact that the academic community has started researching family business only recently and the lack of interest shown by the media have added to the old- fashioned image,” he said.

The upcoming report will also feature other interesting developments in family businesses, including the fact that 42 per cent of family businesses rely on funding from high net-worth individuals, a third of them are taking more interest in philanthropy, 88 pc of family businesses have put a formal governance structure, 76 pc have integrated non-family executives in management positions and 74 pc of them have developed activities abroad, the KPMG partner added.

One of the biggest challenges faced by the family businesses is the disintegration business by the fourth generation. Data shows that only four pc of family businesses reach the fourth-generation stage.

Even then, family businesses are found to be performing better than the corporate sector on many counts. On a total- shareholder-return metrics, family businesses outperformed listed companies, a study tracking more than a decade of corporate performance said. This is because, they have a long-term focus and spends triple the amount spent by the listed companies in training their employees, he noted.

Aiding this performance are the facts that they take less debt and doesn’t diversify too far.

As a solution to the observed dilemma of business withering off by the fourth generation, the KPMG partner referred to the practice followed by many business families now, in which the younger generation by the age of 16 or so, has to compulsorily undergo internship for a month or a two every year. Otherwise, they will not be allowed shares in the business in the future.

Also, if a family member is not interested to take part in the business, he or she will be allowed to sell the stake, for which an internal stock exchange like mechanism will be available, he added.

After all, family businesses thrive by focusing more on being a family. Businesses can be changed, whereas families cannot be, Christophe Bernard added.

‘Family businesses heading ï¿¼ï¿¼ï¿¼ ï¿¼ï¿¼to major strategic overhaul’

Editorial Team Legacy

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