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It’s in their DNA: Pandemic recovery lessons from family businesses

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COVID-19 has hit businesses hard in all parts of the world, forcing companies to make changes and adapt quickly. Some failed, others barely survived, but there is one type of businesses that fared better than others: family businesses, writes Graham Paul.

The numbers still show the devastating operational environment that these businesses were operating in. According to a KPMG report which surveyed over 3,000 family businesses of varying sizes between June and October 2020, 69% of these saw their revenue decrease, 22% stayed the same, whilst 9% managed to grow. These businesses reduced their workforce by 8.56%, faring better than non-family businesses which saw a decrease of 10.24%.

According to the report, this outperformance is set to continue, and family businesses will “likely remain in the driver’s seat of the [global] economic recovery and provide important leadership for others to follow”.

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This is in some measure due to the very DNA of family businesses which build resilience, with factors like their entrepreneurial origins, the emotional commitment of their governing bodies and interests in legacy all playing a major role. The crisis triggered their survivability instincts and allowed most of them to survive the worst of the pandemic.

During this turbulent economic period, family businesses embraced business transformation, with 42% of family businesses being more likely to deploy a business transformation strategy than non-family firms.

Some of this innovation was supported by EU and government stimulus initiatives. France announced a €100 billion ($121bn) recovery plan in September 2020. This was boosted by the European Union’s six-year, €672.5bn ($814bn) Recovery and Resilience facility announced in February 2021. An estimated 76% of family businesses globally accessed some form of government subsidies or other forms of financial support.

In the Gulf, where the family business model is particularly prevalent, the government of the United Arab Emirates created a Virtual Labour Market. This initiative allowed companies forced to let employees go to register their details, while businesses seeking to employ non-Emirati workers would post their vacancies. This facilitated the rapid expansion and contraction of family businesses as necessary to their immediate and long-term survival during the pandemic, particularly as government restrictions on external travel fluctuated.

This was not an entirely selfless act by governments. According to the Family Firm Institute, family enterprises constitute around two-thirds of all businesses around the world, generate approximately 70-90% of annual global GDP, and create 50-80% of jobs in the majority of countries worldwide.

This is particularly the case in the Gulf region. “I do not think it is an exaggeration to say that the economic prosperity of the GCC rests on the success of its family businesses,” said Omar Alghanim, chairman of the Family Business Council – Gulf (FBC-G), in an interview with Arabian Business.

Alghanim founded FBC-G seven years ago as a support mechanism for family businesses, through networking, resources, and educational programs with a focus on supporting the development of the Gulf region. These mechanisms have been a huge contributor to recovery from the pandemic not just for the businesses, but for GCC states themselves.

The FBCG supports family businesses by working with policymakers and governments and the entrepreneurial Alghanim, who hails from a family business himself, sees a real opportunity in the current uncertainty.

“This is an opportune time to collaborate strategically with policymakers to not only support the continuity of family businesses but also to drive their overall transformation,” says Alghanim.

Last year the FBCG was busy at work establishing partnerships such as its Memorandum of Understanding with the Dubai Chamber of Commerce to collaborate on research, education and raising awareness of the changing needs of family business in Dubai.

More initiatives like this could be a saviour for the region which saw youth unemployment reach 30% in the past year – double the global average.

As Europe struggles through the next steps in its COVID recovery process it would do well to look to initiatives such as this to support the longevity of its family businesses.

Whatever the challenges, it seems that family businesses, especially multi-generational ones, are better at overcoming difficult times creating more resilient economies. Family businesses that are supported now will continue to apply the same resilience and entrepreneurship to tomorrow’s challenges.

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