‘War for talent’ intensifies for family businesses - KPMG

Europe’s family businesses are more impacted than ever by the ‘war for talent’, the European Family Businesses (EFB) and KPMG Enterprise European Family Business Barometer has found.

Their ability to attract and retain the skills needed throughout their business is now the sector’s number one concern, the document reports.

With approximately 62,600 family businesses employing staff in Scotland, its authors claim the findings are further evidence that securing skills is a key regional business issue.

More than four in ten (43 per cent) of the family business representatives surveyed named recruiting skilled staff as one of their businesses’ major issues – ahead of increasing competition (37 per cent) in second and declining profitability (36%) in third place. The proportion citing recruitment of talent as a key concern has risen from 37 percent last year and 33 percent in 2015.

With almost eight in ten (78 per cent) 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.

Kirsty Ross, family business consultant for KPMG in Scotland, 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 skills existing outside of the family gene pool grows, in a high employment economy, the experience of the war for talent intensifies as they compete to attract staff with sought after skills.

“Given the vast majority (87 per cent) 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. It’s therefore 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. This might include their commitment to staff and communities, and be demonstrated by tangibles such as higher levels of investment in training and corporate responsibility, as well as relatively fewer redundancies during tougher times.

“Make no mistake, this is a critical business issue. Without the right skills in a business it will struggle to deliver on its potential and to grow in a competitive market. With 41 percent of family businesses growing their headcount in the last year and 37 percent identifying increased market competition for their goods or services as a significant commercial issue, families in business cannot afford to lose out on skills.”

Other key commercial findings:

Elizabeth Bagger, executive director at the Institute for Family Business, the UK Chapter of the EFB, said: “Family businesses are the backbone of the UK economy, and these findings show yet again how resilient and ambitious they are. UK family firms have a strong heritage and track record, but they are always looking to the future. They are ambitious to grow, to create jobs, to build a stronger presence in their local communities, and to pass something stronger on to the next generation.

“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.”

Key family findings

Kirsty Ross added: “It’s undoubtedly a positive that the desire to balance the needs of the business with those of the family is emphatic given it suggests an acknowledgement that without careful management of both, conflict can arise. While in-itself not always a negative, most people would rather avoid conflict and a good start is to establish clear rules for what family members can expect from the business and what the business can expect from them.

“Succession meanwhile is a perennial family business issue. Again, I’m pleased to see such a majority placing value on preparing a successor. As such, we’re seeing around half of family businesses with the next generation currently in management roles, while one in ten are clear on their aim to appoint a non family CEO in the near future. However, eight in ten do not have a CEO succession plan, suggesting 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.”