Family businesses in Canada and worldwide are harnessing their unique strengths to rebound from COVID-19 and are positioned to help spur a post-pandemic recovery, finds a new report by KPMG Enterprise and the STEP Project Global Consortium.
The KPMG Global Family Business Report: COVID-19 edition, titled Mastering a comeback: How family businesses are triumphing over COVID-19, provides insights into how family businesses navigated enormous challenges and why these businesses are better positioned to play a key role in revitalizing the global economy. The global report analyzes survey data from nearly 2,500 family businesses and more than 500 non-family businesses, including a selection of Canadian family enterprises.
“The study revealed that the dynamics and structure of family-owned businesses made them more resilient and responsive to the initial shock of the pandemic, and enabled them to adapt and recalibrate to pursue new business opportunities,” says Mary Jo Fedy, national enterprise leader, KPMG in Canada. “The pivotal role of the family helped to safeguard both financial investments and family legacies. A long-term mindset and other differentiators helped many family-owned businesses gain a competitive advantage and positions them to drive future economic growth.”
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“The skillsets and perspectives of a younger, more tech-savvy generation were highly influential and instrumental in reimagining the strategic direction of the business,” adds Fedy.
Gregory Sanders, partner at KPMG Law LLP in Ottawa, remarked: “Family business is a key component of the Ottawa economy that will help drive the recovery from COVID-19. Despite the hardships encountered by businesses as a result of the pandemic, it is the family business that will ensure Ottawa rises back to pre-pandemic levels of success and beyond.”
Key report findings:
- A majority (53 per cent) of Canadian respondents experienced an initial decline in revenue, versus 69 per cent globally.
- 17 per cent of Canadian businesses saw revenues increase (compared to nine per cent globally), frequently by taking action to pivot the business.
- Only eight per cent of Canadian family businesses surveyed reported a workforce reduction, consistent with the global average. By comparison, non-family businesses were slightly higher at more than 10 per cent.
- Globally, family businesses were 42 per cent more likely to deploy a business transformation strategy than non-family businesses.
- Three quarters (76 per cent) of families surveyed worldwide accessed government support programs for their business, primarily low-cost loan arrangements.
Taking swift, decisive action
The report documented a series of initial actions to protect and stabilize the family business during the early phases of the pandemic. In Canada, the most widely implemented actions involved: cutting office expenses (40 per cent); shifting employees to remote work (35 per cent); renegotiating vendor contracts (15 per cent); and reducing or deferring executive compensation (10 per cent).
The decision to reduce the pay or bonuses of family members involved in the running the business was one of several actions that both supported the business and upheld the family’s values.
Three strategies for a comeback
The report uncovered three core strategies used by family businesses to respond to the impact of the pandemic on the business and family legacies: business transformation, social responsibility and exercising patience. Business transformation ranked as the number one priority for Canadian businesses, highlighting a strong focus on long-term strategic planning.
“Family business owners tend to look beyond short-term profits and measure success by the ability to sustain and protect the longevity of the business and succession plans for the next generation,” says Yannick Archambault, partner and national family office lead, KPMG Enterprise. “Many leaders took the opportunity of a slowdown to fully understand business and industry impacts, carefully leverage their patient capital, and explore new business models and markets.”
Corporate social responsibility was often an immediate, short-term response to the pandemic, reflecting a commitment to the welfare of employees and society, and to upholding the reputation of the business, notes Archambault.
Rallying multi-generational strengths
“The next generation understands that digital adoption and ESG strategies are necessary to sustain business operations and achieve future business and family goals,” says Daniel Trimarchi, director, family enterprise advisory, KPMG in Canada. “Overall, the pandemic accelerated conversations within families on governance to enable faster decision-making on these types of issues and better engagement with family members and shareholders.
“Given how much economic impact family-owned business have in Canada, their ability to rebound strongly and achieve their full potential will be a powerful factor in revitalizing our economy,” adds Archambault.
About KPMG Family Office
Backed by the strength of KPMG’s 150-year heritage, KPMG Family Office works with individuals and families to help manage the complexities of their wealth, so they can continue their success journey and thrive for generations to come.
Our approach recognizes that every individual and family is unique, and our team across Canada and globally offers personalized advice for every stage of their lives.
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