THE VALUES EFFECT PWC GLOBAL FAMILY - HOW TO BUILD A LASTING COMPETITIVE ADVANTAGE THROUGH YOUR VALUES AND PURPOSE IN A DIGITAL AGE

 
THE VALUES EFFECT PWC GLOBAL FAMILY - HOW TO BUILD A LASTING COMPETITIVE ADVANTAGE THROUGH YOUR VALUES AND PURPOSE IN A DIGITAL AGE
PwC   Global
 1 | PwC          Family
         Global Family Business Survey 2018

Business Survey 2018

The
values
effect
How to build a lasting competitive
advantage through your values and
purpose in a digital age

                                                  #pwcforfamilybusiness
                                              pwc.com/fambizsurvey2018
THE VALUES EFFECT PWC GLOBAL FAMILY - HOW TO BUILD A LASTING COMPETITIVE ADVANTAGE THROUGH YOUR VALUES AND PURPOSE IN A DIGITAL AGE
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                                                 Foreword
                                                 We believe family businesses – built around strong
                                                 values and with an aspirational purpose – have a
                                                 competitive advantage in disruptive times. There
                                                 is an enormous opportunity for family businesses
                                                 to start generating real gains from their values and
                                                 purpose by adopting an active approach that turns
                                                 these into their most valuable asset.
THE VALUES EFFECT PWC GLOBAL FAMILY - HOW TO BUILD A LASTING COMPETITIVE ADVANTAGE THROUGH YOUR VALUES AND PURPOSE IN A DIGITAL AGE
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    The release of our ninth PwC Global Family Business Survey comes at a time of          No global survey of the health of family business in 2018 would be complete
    extraordinary transformation. Digital technology is disrupting whole industries;       without looking at the challenge of digitalisation. There was a marked jump since
    sustainability is becoming central to the conduct of business; in the corporate        our last survey (2016) in the number of businesses feeling vulnerable to digital
    and financial worlds, winning trust is more important than it’s ever been; and         disruption – a trend highlighted in PwC’s latest annual flagship CEO Survey as
    millennials represent an enduring demographic change.                                  well. Many family business leaders recognise the digital challenge, and many are
                                                                                           preparing for it. But there’s a real opportunity to boost engagement in the digital
    We believe that family businesses – often built around strong values and with an
                                                                                           realm by enlisting the help of the next generation.
    aspirational purpose in mind – have a competitive advantage at a time like this.
    They are trusted more than non-family businesses by a 16-point margin globally,        Overall, our respondents expressed enormous optimism about future growth
    according to a special report in the 2017 Edelman Trust Barometer. And it’s            but also increasing concern about changing business models, digitalisation,
    long been recognised that a family firm – ranging from a global enterprise             cybersecurity, regulation and protectionism. They are thinking carefully about
    to a business in a small community – is more likely than other companies to            innovation and attracting and keeping the right talent for their business.
    treat each day’s activity as an investment in the long term, prioritising broad        This suggests that there’s never been a more pressing time to get the
    stakeholder interests over satisfying the quarterly earnings cycle.                    fundamentals right.
    Yet one consistent finding since we started this biannual survey in 2002 is that       For this year’s report, we surveyed 2,953 companies in 53 territories, covering a
    many family businesses are not yet turning these inherent advantages into a            wide range of sectors, from agriculture to technology. We would like to thank the
    winning strategy to help secure profitable, long-term legacies. This latest survey     respondents for taking the time to participate. We were also privileged to speak
    suggests there is a great opportunity here. Indeed, a healthy 75% of our survey        with leaders at 10 of the world’s most prestigious and successful global family
    respondents felt that having a clear set of values created a competitive advantage.    businesses. We would like to express our sincere thanks to them for being so
    There was also evidence that businesses with annual growth of 10% or more              generous with their time and insights (a full list of those interviewed is available
    tended to be those with a clear sense of agreed values and purpose.                    on page 54).
    This plays into legacy in an important way. Family businesses are being                We hope you’ll find the report valuable and that its insights will help you make
    propelled towards a vastly different landscape. The strategies that worked well        better decisions for your family business.
    in the past might not be sufficient to sustain their businesses in the future. How
    can family businesses harness the legacies of the past and strive for strategic
    renewal, using their values as a key differentiator? And how should the next
    generation play a role in tackling digital disruption while preserving the values of
    the business?
    There is an enormous opportunity for family businesses to start generating real                     David Wills                                  Peter Englisch
    gains from their values and purpose by adopting an active approach that turns                       Global Leader - Entrepreneurial &            Global and EMEA Family
    these into their most valuable asset.                                                               Private Business, PwC Australia              Business Leader, PwC Germany
THE VALUES EFFECT PWC GLOBAL FAMILY - HOW TO BUILD A LASTING COMPETITIVE ADVANTAGE THROUGH YOUR VALUES AND PURPOSE IN A DIGITAL AGE
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    Contents

    6                                            13                               25
    Growth – and how to sustain it               Getting value from your values   Pursuing purpose

    32                                           43                               51
    Securing legacy in a digital age             Private equity:                  A final word
                                                 thinking outside the family
THE VALUES EFFECT PWC GLOBAL FAMILY - HOW TO BUILD A LASTING COMPETITIVE ADVANTAGE THROUGH YOUR VALUES AND PURPOSE IN A DIGITAL AGE
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    Case studies

    11                                    18                        21                     23                          28
    Defining the role of                  Projecting a vision for   Bringing values        Taking the long view on     Showing values
    business in five principles           business in society       to life                values for sustainable      through sustainability
                                                                                           business
    Victoria Mars,                        André Hoffmann,           Johan H. Andresen,                                 Simone Bagel -Trah,
    Mars Inc.                             Roche                     Ferd                   Andrea Illy,                Henkel
                                                                                           illycaffè

    30                                    39                        41                     47                          49
    The value of constant                 Channeling legacy in      Always valuing         Building on shared values   The virtue of humility
    entrepreneurship                      valuable ways             independence, across   between families            as a value
                                                                    generations
    Eddy Lee,                             Fernando Simões,                                 Sumeet Valrani,             GM Rao,
    Lee Kum Kee                           The JSL Group             Reinhard Zinkann,      Al Shirawi Group            GMR Group
                                                                    Miele
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    Growth – and how to
    sustain it
    This year’s survey finds family businesses in robust
    health, with levels of growth at their highest level
    since 2007. Yet there is a nagging sense among
    many family businesses that the trajectory of growth
    over the next two years and beyond can’t easily be
    charted, given a set of key challenges.
THE VALUES EFFECT PWC GLOBAL FAMILY - HOW TO BUILD A LASTING COMPETITIVE ADVANTAGE THROUGH YOUR VALUES AND PURPOSE IN A DIGITAL AGE
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    This year’s survey finds family
    businesses in robust health, with
                                                 Exhibit 1: Family business growth ambitions, by territory
    levels of growth at their highest since
    2007. Revenues are expected to               Key
    continue growing for the vast majority
                                                                     Percentage of respondents looking to
    of businesses (84%), with 16% saying
                                                                     grow quickly/aggressively
    growth will be ‘quick’ and ‘aggressive’
    (see Exhibit 1).
                                                          100
    Sixty-nine percent of our respondents
    saw revenue growth in the 12 months
    before the survey was conducted,
    compared to 64% reporting revenue
    growth over the same period when
    we last did the survey in 2016.
    These findings echo what we found
    in the private-company cut of our
                                                  % of respondents

    2018 CEO Survey, where a solid
    majority of private-company chief
    executives said they were somewhat
    confident or very confident about their
    company’s growth prospects in the                                                                                                    Global average 16%
    next 12 months.
    Of the 722 private-company chief
    executives polled for that report,
    85% said they were somewhat
                                                                     0
    confident or very confident about
                                                                                       India
                                                                                    Nigeria
                                                                                 Indonesia
                                                                                      China
                                                                                     Keny a
                                                                                     Russia
                                                                               Bangladesh
                                                                              South Africa
                                                                                     Turkey
                                                                                  Australia
                                                                                Hong Kong
                                                                                  Malaysia
                                                                                    Greece
                                                                                    Taiwan
                                                                                          UK
                                                                                Singapore
                                                                                  Denm ark
                                                                                   Canada
                                                                                  Rom ania
                                                                                          US
                                                                                    Mexico
                                                                               Middle East
                                                                         Papua New Guinea
                                                                                    Ireland
                                                                              Netherlands
                                                                                    Finland
                                                                                 Colom bia
                                                                                  Ecuador
                                                                                      Brazil
                                                                                   Sweden
                                                                                     Japan
                                                                                    France
                                                                                        Italy
                                                                                    Poland
                                                                                      Malta
                                                                                      Spain
                                                                               Switzerland
                                                                                   Belgium
                                                                                    Austria
                                                                                  Germany
    their company’s growth prospects in
    the next 12 months.

                                                 Base: all respondents in each market (2018: all answering n=30–171 in each territory)
                                                 Source: PwC Global Family Business Survey 2018
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    Yet there is a nagging sense among
    many family businesses that the
                                                 Exhibit 2: Key challenges for family businesses over the next two years
    trajectory of growth over the next
    two years and beyond can’t easily
    be charted, given a set of key                              The need to innovate to keep ahead                     66%
    challenges (see Exhibit 2). Among the
    top five challenges were: innovation                    Accessing the right skills & capabilities                  60%
    (66%), accessing the right skills and                                       Economic environment                   56%
    capabilities (60%) and digitalisation
    (44%). Indeed, 80% say digitalisation,                                       Domestic competition                  49%
    innovation and technology ranked
                                                                                             Digitalisation            44%
    together as a significant challenge.
    Moreover, more businesses feel                                  Prices of energy & raw materials                   43%
    vulnerable to digital disruption
    specifically (30%) than at the time of                                                      Regulation             43%

    our 2016 survey (25%). Our survey                            Professionalisation of the business                   41%
    respondents shared concerns about
    companies coming out of nowhere                                                        Cyber security              39%
    and toppling established businesses.                                              Data management                  39%

                                                                             International competition                 38%

                                                                                               Succession              33%

                                                                                     Access to financing               25%

                                                   Corruption in the countries where you operate                       23%

                                                      The growth of artificial intelligence/robotics                   22%

                                                                                International tax reform               16%

                                                                   Conflict between family members                     14%

                                                                  The UK's decision to leave the EU                    11%

                                                 Base: all global respondents (2018: all answering n=2,950 – 2,952).
                                                 Source: PwC Global Family Business Survey 2018
THE VALUES EFFECT PWC GLOBAL FAMILY - HOW TO BUILD A LASTING COMPETITIVE ADVANTAGE THROUGH YOUR VALUES AND PURPOSE IN A DIGITAL AGE
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    Our survey findings show that first-
    generation family businesses clearly
                                                 Exhibit 3: Growth rate by generation running the business
    outperform those run by subsequent
    generations in their ability to achieve
    double digit growth, highlighting the
    need to balance business model
    continuity with an appetite for                                                                                                                                          48%
    disruption (see Exhibit 3).
    Reconciling optimism with concern will                                                                                                                44%       Single-digit sales growth
    naturally seem challenging. But one big                                                42%
                                                                                                                                        41%
    takeaway that emerges is this: those
    family businesses that are actively
    pursuing their values and purpose and                                                                         35%
    nailing down a clear strategic plan
    are showing the way. Specifically,                                                                            32%                                     32%
    respondents who said they deliver                                                                                                                               Double-digit sales growth
    10% or more annual growth tend to                                                      28%                                          27%
    have some consistent attributes (see
    Exhibit 4, page 10). Eighty-four percent
    say they have a clear sense of agreed                                                                                                                                    22%
    values and purpose, compared to
    76% of those that had slower growth.
    Almost two-thirds (63%) said they
    intend to make significant strides in
    digital capabilities (compared to 54%
    among businesses that have slower                                                     1st                    2nd                   3rd                4th              5th +
    growth). And 55% had a fully costed,                                               generation             generation            generation         generation        generation
    formalised and documented strategic
    plan (compared with 46% for the
    slower growth group). This tells us that                                                                     Generation running the business
    it pays to take an active approach to
    values and purpose.

                                                 Base: all 1/2/3/4/5+ generation global respondents (2018: all answering n=1,040/1,082/480/187/127)
                                                 Source: PwC Global Family Business Survey 2018
THE VALUES EFFECT PWC GLOBAL FAMILY - HOW TO BUILD A LASTING COMPETITIVE ADVANTAGE THROUGH YOUR VALUES AND PURPOSE IN A DIGITAL AGE
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   It also pays to plan ahead. Mid-term           key performance indicators (KPIs).
   strategic planning – over a three - to         There is a correlation between
                                                                                         Exhibit 4: Behaviours of family businesses with 10%+ growth
   five-year time frame – is often one            these high-strategic planners
   of the biggest missing pieces of the           and other high value groups.
   puzzle for family businesses. This             High- strategic planners constitute
   was also a theme of our 2016 survey            56% of the companies with a
   (The ‘missing middle’: Bridging the            high level of philanthropy; 53% of
   strategy gap in family businesses).            those with a robust, documented
                                                  and communicated succession
   This year, we found that survey
                                                  plan; 46% of businesses with
   respondents fall into three groups:

                                                                                           84%                                             63%
                                                  annual turnover above US$100m;
   • The first group, making up 21%               42% of companies with double-
     of the total, has no strategic               digit growth; and 41% of those
     plan at all. These ‘low-strategic            with a high level of focus on
     planners’ seem to be more focused            digital technology.                      Have a clear sense of agreed                    Are aiming to make significant steps
     on keeping the boat afloat than                                                       values and purpose as a company                 in terms of digital capabilities
                                                High-strategic planners are                (vs. 76% among those who have                   (vs. 54% among those who have
     thinking about where it’s going.
                                                translating their strategic goals into
11 |    PwC Global Family Business Survey 2018

                                                   Defining the role of
                                                   business in five principles
                                                   Mars Inc., US
                                                   Victoria Mars, Member, Board of Directors (Chairman of the Board from 2014 to 2017)

                                                   Businesses often display their principles and values         in 80 countries. The company’s five principles, which
                                                   on their website and in their marketing materials.           are visibly present in each of its hundreds of sites,
                                                   Some even carve them onto the walls of their offices.        unite Mars associates across geographies, languages,
                                                   But do they live by their principles in everything           cultures and generations.
                                                   they do? Those looking from the outside at most
                                                                                                                The company’s approach makes a good example of
                                                   businesses would probably need some convincing.
                                                                                                                what it means to have values clarified, codified and
                                                   One company that might convince them is the family-
                                                                                                                communicated. The principles are not only written
                                                   owned business Mars. A diversified, global business
                                                                                                                down, but are brought to life in detail in a 26-page
                                                   in pet care, confectionery and food, Mars operates
                                                                                                                document on the company’s website. In it, each
                                                   according to five principles that are deeply embedded
                                                                                                                value is given practical relevance and application for
                                                   in the company’s culture.
                                                                                                                employees, suppliers and other stakeholders.
       Established:            1911                The Five Principles are: quality, responsibility,
                                                                                                                For instance, much is made of the way in which Mars
                                                   mutuality, efficiency and freedom. “There’s not a
                                                                                                                is a decentralised organisation in which employees
       Current generation                          conversation I have with our associates and leaders,
                                                                                                                – which it calls associates – are given the “freedom
       leading the             Fourth generation   other corporations, government officials, or when
       business:
                                                                                                                to act with full responsibility for doing their assigned
                                                   I speak in public that doesn’t weave in The Five
                                                                                                                jobs.” In the workplace, “divisive privileges” are to be
                                                   Principles,” says Victoria Mars. Mars, the former
       Annual turnover         More than
                                                                                                                avoided, and an egalitarian spirit is encouraged.
                                                   chairman and current director of the Virginia-based
       (2017):                 US$35bn             company and a member of the fourth generation                Under the principle of mutuality, the company holds
                                                   of the family owners, stresses the importance of             that its business relationships should be measured by
       Number of                                   nurturing these principles. “Repeat, repeat, repeat;         the degree to which they create mutual benefits for the
                               115,000
       employees:                                                                                               company and its stakeholders. Success is achieved
                                                   demonstrate, demonstrate, demonstrate The Five
                                                   Principles all the time. It’s so critical you don’t forget   if quality and value are given to customers, suppliers,
                               Pet care,                                                                       distributors and others. “Gains that ignore this will be
                                                   about these five principles.”
       Sector/s:                confectionery,
                                                                                                                short-lived” is the powerful warning in this section.
                                food               Mars is one of the biggest privately-owned businesses
                                                   in the world, and it employs more than 100,000 people        The fifth principle, freedom, takes as its starting point
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   Defining the role of business in five principles (cont.)
   the “deliberate choice” that Mars is         with your associates, your community      connector between the family and the        “From one generation to
   a privately held company. Free from          and all your business dealings as         company are The Five Principles of
   what Mars calls the “restrictions”           the very objective for the company’s      how we do business. It’s the glue that       the next, it was always
   of having to incur debt to grow – as         existence. This has shaped the            holds us together.”                          about how we did
   many publicly listed companies do –          family’s values and principles, and was
   the company has more control over its        further expanded when my father, my
                                                                                          What these principles can mean               business rather than what
                                                                                          in practice has recently been
   affairs. It has the freedom to re-invest     uncle and my aunt codified The Five
                                                                                          demonstrated in the launch of
                                                                                                                                       we do as a business, and
   a substantial portion of its profits         Principles in the early 1980s. They
                                                                                          the company’s ‘Sustainable in a             The Five Principles came
   each year. “As long as Mars remains          have been updated a few times, but
                                                                                          Generation’ plan. This comprehensive         out of that legacy.”
   free, our well-being can always come         what hasn’t changed is the principles
                                                                                          programme was launched in 2017
   before any other financial priority,” the    themselves. What evolves more
                                                                                          and has three pillars that the company      and how governments feel about us
   company states in its description of         constantly is the relevance of how one
                                                                                          is working to create through its            working in their country.”
   this fifth guiding principle.                lives them in the current times.
                                                                                          operations: ‘healthy planet’, focused
   Victoria Mars says it’s unlikely the         “As a child, I grew up with these         on climate change, land and water           Mars also believes a broader definition
   company would have been as                   principles as part of how we lived as a   stewardship and waste management;           of the purpose of business is vital to
   successful building its business             family. They weren’t hanging on a wall,   ‘thriving people’, focused on, among        engage the next generation. “Business
   without The Five Principles. “From one       posted on the kitchen fridge. But they    other things, increasing incomes and        is more than earning a return. It is
   generation to the next, it was always        guided our family and me on how we        unlocking opportunities for smallholder     about the impact you have on the
   about how we did business rather             interacted with people. I thought this    farmers in the company’s supply chain,      world, and that is absolutely important
   than what we do as a business, and           was just the norm.”                       including disadvantaged women; and          to the next generation,” she says.
   The Five Principles came out of that                                                   ‘nourishing wellbeing’, focused on          “As the fourth generation of our
                                                For the Mars family, having these
   legacy,” she says.                                                                     health issues among people and –            family, my siblings, cousins and I are
                                                principles helps the family steer what
                                                                                          naturally – their pets, too.                asking ourselves how we are going to
   The values embedded in the principles        it believes is the right course for the
   come from Mars’ grandfather, Forrest         business – and the principles are not     Another practical expression of the         keep our children, grandchildren and
   Mars, Sr., whose father, Frank, founded      open to challenge, as Mars explains.      company’s principles is highlighted by      great-grandchildren connected to the
   Mars as a confectionery company – a          “You can get managers that can            their use in helping to recruit the right   business when they aren’t going to
   precursor of today’s Mars company –          come along who might say we need          talent, says Mars. “Our principles and      be as closely linked as we are,” Mars
   in the US state of Washington in 1911.       to change aspects of the principles,      values will attract the associates we are   notes. “We’ve got to find another way
                                                but the family will say: ‘You don’t       looking for to work in our business and     to connect them. It’s easy to end up
   “My grandfather was a great believer                                                                                               with just words on a wall; you have
                                                understand; these are our principles,     will keep the ones we have working
   in how you do business,” says Mars.                                                                                                to keep training, telling stories and
                                                our values. You don’t have the right to   for us. They will encourage consumers
   “Around 15 years ago, we found                                                                                                     demonstrating how you behave and
                                                change them.’ We own these principles     to buy our products and affect how
   a letter written by him in 1947 that
                                                and values. The business doesn’t          communities we work in feel about           show how to live by these principles.”
   talked about this idea of mutuality
                                                own them; we own them. The real           us being part of their communities,
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                                                Getting value
                                                from your values
                                                As decision making grows more complex during an
                                                accelerated pace of change, family businesses need to
                                                implement guidelines and tools to codify their values as
                                                a way to make better decisions. And our research shows
                                                family businesses that make their values and purpose
                                                explicit and measurable, and incorporate them into
                                                strategic plans, see better returns and greater longevity.
                                                Adopting an active stance towards values really pays off.
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   The values of a company are the                   worked with, products and services         founding companies based on a              “My grandfather was a
   operating beliefs and principles that             launched and ways of managing              clear set of values, and many of them
   guide behaviour among not just the                employees.                                 have themselves come from family-
                                                                                                                                            great believer in how you
   leadership but also its employees.
                                                     Companies that are managed with
                                                                                                led businesses, where they would            do business. Around 15
   These concepts often manifest in the                                                         have learned, first-hand, the role that    years ago, we found a
                                                     strong values, a clear purpose and an
   company’s culture.                                                                           clearly articulated values can have.
                                                     eye for legacy will tend to build trust
                                                                                                Businesses that talk about their values     letter written by him in
   They affect not just what a company               and loyalty among staff, suppliers
   says but also what it does. For                   and consumers, and will have greater
                                                                                                as ‘social capital’ and treat this as      1947 that talked about
                                                                                                an asset that is relevant to today’s        this idea of mutuality with
   example, a family business might                  resilience during downturns. This
                                                                                                world can get better returns if they act
   collectively agree on the need for                is why family businesses are often
                                                                                                smartly and communicate their values       your associates, your
   community investment, just as it                  viewed as more trustworthy than other
   might agree on the need for trust and             companies.1
                                                                                                effectively.                                community and all your
   cohesion among family members
                                                     Although many family businesses
                                                                                                Businesses that embody their values         business dealings.”
   and employees. Genuinely held                                                                in everyday practices and routines
                                                     are strongly aligned around a shared                                                  - Victoria Mars, Member, Board of Directors
   values become ingrained in everyday                                                          get better results. “The ones that get
                                                     sense of values, they don’t always                                                     (Chairman of the Board from 2014 to 2017),
   practice: the deals made, suppliers                                                          it right start with understanding the
                                                     use them to their full advantage until                                                 Mars Inc. (US)
                                                                                                value of values. They get that this is
                                                     there is a crisis. A faulty product hits
                                                                                                what distinguishes them in the market.     they had a significant advantage over
  “You can only interpret                            the market and the company goes
                                                                                                It’s their DNA, their secret sauce,”       non-family businesses because they
                                                     into crisis mode and has to remind the
   the values of the family                          market that it’s not some less-than-
                                                                                                says Dr. Justin Craig, a professor         have a stronger culture and values.
                                                                                                of family enterprise at Northwestern
   – the values of the                               professional operation. Rather, it’s a
                                                                                                University’s Kellogg School of             This year, 79% felt they had a clear
                                                     family business with its name on the
   business – by living                              door – one that cares deeply about
                                                                                                Management. “This is what has helped       sense of values and purpose as
                                                                                                                                           a company. Breaking it down by
   them personally and by                            its customers and stakeholders – and
                                                                                                them across previous disruptions. The
                                                                                                thing that distinguishes successful        region, there were some interesting
   making everybody in the                           one with a legacy worth preserving.
                                                                                                family businesses is that they take the    differences: only 68% of respondents
   business aware of them,                           What if family businesses codified         time to communicate and educate            in Asia felt this to be the case,
                                                     these values right from the start and                                                 compared with 86% in both Africa
   by making the ‘genetic                                                                       and remind themselves, and the next
                                                                                                                                           and Latin America, 81% for North
                                                     made them active? Our research             generation, early and often about the
   code’ of these values                             shows family businesses that make          value of values.”                          America and 80% for Europe (see
   comprehensible                                    their values and purpose explicit
                                                                                                This year, we set out to test some of
                                                                                                                                           Exhibit 5). Of the global total, 70% felt
                                                     and measurable, and incorporate                                                       strongly that having a clear sense of
   to all.”                                          them into strategic plans see better
                                                                                                the findings about values from our         agreed-on values increased revenues
                                                                                                2016 survey. That report found that        and profitability. Critically, as many
   - Dr. Reinhard Zinkann, Co-owner,                 returns and greater longevity. Indeed,
                                                                                                74% of family businesses believed          as 75% felt that having a clear sense
    Executive Director, Miele (Germany)              many of today’s entrepreneurs are

   1 Source: 2017 Edelman Trust Barometer, Special Report: Family Business
15 |   PwC Global Family Business Survey 2018

   Exhibit 5: Sense of agreed values and purpose, by region

   Key
         Proportion of respondents agreeing strongly with the statement:
         ‘You have a clear sense of agreed values and purpose as a company’

                                                                                                                                                79%
           86%                            86%                       81%                        80%                  68%
              Africa                     Latin America             North America               Europe                  Asia

                                                                                                                                            of respondents on average
                                                                                                                                            globally felt they had a clear
                                                                                                                                            sense of values and purpose
   Base: all global respondents (2018: n=2,167)                                                                                             as a company.
   Source: PwC Global Family Business Survey 2018

   of values gave them a competitive                 annual growth in our survey, 84% had      a value”, page 49). Indeed, living up
                                                                                                                                       “Once we established
   advantage.                                        a clear sense of agreed values and        to codified values and purpose is the    Ferd, we tried to make
   At the same time, only 49% of
                                                     purpose, compared with 76% among          best risk management system you can      a conscious set of
                                                     those with a lower growth rate.           put into place.
   respondents actually had values                                                                                                      assigned values – more
   articulated in written form. This rose            These findings tell us that as decision   When it comes to codifying values,
   noticeably to 53% among businesses                making grows more complex during          a good starting principle is keep
                                                                                                                                        precisely, values we
   generating double-digit growth.                   an accelerated pace of change, family     it simple. The family that controls      would like people to talk
   The message is clear: adopting an                 businesses need more than ever to         Henkel, the Germany-based global         to us about.”
   active stance towards values really               implement guidelines and tools to         chemicals and consumer goods
   pays off.                                         codify their values as a way to make      company, decided some time ago that     - Johan H. Andresen, Owner and Chairman,
                                                     better decisions (see case study on       the business had too many values.          Ferd (Norway)
   Other findings reinforce this point.
                                                     GMR Group, “The virtue of humility as     It cut the list down to a handful and
   Of the businesses with 10% or more
16 |   PwC Global Family Business Survey 2018

  “Our values are the core                      inscribed them on five pillars in the     No matter how solid your values              and shareholders. Everyone must be
                                                lobby of company headquarters in          are, they will change over time.             committed to the actions needed to
   of everything. They are                      Düsseldorf. “The previous set of values   As the business grows and new                support these shared values. One
   the first pillar of what                     wasn’t clear enough,” says Dr. Simone     people join, leaders need to revisit         example of how family businesses
   we do and why we do                          Bagel-Trah. “And we had too many          what those values are and, in some           are doing this is to develop a values
                                                of them. Reducing their number from       cases, refresh them. Values cannot           compass, as the family-owned
   it. Our values of ‘decent,                   10 to five allowed us to ensure that      simply be assumed; they need to be           company Mars has done to great effect
   worthwhile, secure’                          everyone remembers and understands        brought to life by living up to them.        (see case study, “Defining the role of
                                                them. It’s much easier to identify        So, it is important to talk about and        business in five principles,” page 11).
   underpin what we are
                                                with a set of values and act on them      champion values regularly to make
   all about. None of them                      when they are clearly laid out and are    sure people agree on what they mean
                                                                                                                                       It is also useful to recognise the
                                                                                                                                       difference between having family
   are more important than                      relevant to employees in their daily      and their relevance. It is also crucial to
                                                                                                                                       values and having values that work
                                                work.” (See case study, “Showing          examine whether values drive the right
   the others, because they                     values through sustainability,”           behaviours to improve performance,
                                                                                                                                       for the business, as illustrated by our
                                                                                                                                       case study on Ferd, a Norwegian family
   work together. Those                         page 28).                                 including those of management, staff
   three words are our
   benchmark for decision                                                                                                              “We have many
   making.”                                                                                                                             thousands of employees
   - Jonathan Falder, Managing Director,                                                                                                and recruit many every
    HMG Paints (UK)
                                                                                                                                       year, but what we always
                                                                                                                                        try to do is use our
                                                                                                                                       values to help us make
                                                                                                                                        the right decisions when
                                                                                                                                        hiring. We always seek
                                                                                                                                        to hire people who have
                                                                                                                                        principles in their DNA
                                                                                                                                        that are in line with our
                                                                                                                                       values.”
                                                                                                                                       - Fernando Simões, Chief Executive,
                                                                                                                                        The JSL Group (Brazil)
17 |   PwC Global Family Business Survey 2018

   “We realised that we                         firm (see case study, “Bringing values    largest independent agriculture group,     Every employee who joins AX
                                                to life,” page 21). The company was       which traces its roots to the owning       Holdings, a diverse group in Malta
    could not do business                       established in its current form in the    family’s farming activities in 1698.       operating in hospitality, healthcare,
   with an opportunistic                        1990s but has a pedigree stretching       Chief Executive Tommie van Zyl says        construction and development, must
    mind-set. Each business                     back more than 160 years. Before Ferd     everyone from the purchasing office        attend a course about the group, the
                                                was established, the Andresen family      through to the logistics supply chain      businesses, its values and how those
   was different, and there                     “internalised our values,” explains       understands the business’s value           values are applied. “In this way, we
   were no synergies                            Chairman Johan H. Andresen. “They         system. “We adopted an ‘open systems       have a cascading effect that ensures all
                                                were good, old-fashioned types of         philosophy’ in our business. Instead       employees adopt these values,” says
    between them. It
                                                values, like honesty, dedication and      of focusing internally on the family or    Chief Executive Michael Warrington.
   was very difficult to                        loyalty. But they weren’t something       on the business all the time, the focus
                                                                                                                                     Values can also help with recruitment.
    synchronise all the                         that drove the business.                  should be outside of that, and thinking
                                                                                                                                     Our survey showed that 79% of
                                                                                          about the interactions and the linkages
    businesses we had                           “We weren’t going to take our family
                                                                                          in the wider world,” he says.
                                                                                                                                     respondents that had a clear sense
                                                values and say the business should be                                                of values felt that this helped attract
    entered into. We then
                                                like this. You might say the company’s                                               potential joiners. This is illustrated by
    thought that we should                      values [now] overwrite the family’s                                                  our case study on The JSL Group
                                                                                          “It’s much easier to
    have a vision, have our                     values,” says Andresen, explaining                                                   of Brazil (see “Channelling legacy in
                                                that the family took the famous quote      identify with a set of                    valuable ways,” page 39).
    own values and create                       by (the former US president) John F.       values and act on them
    a robust organisational                     Kennedy, adapting it into ‘Ask not what
                                                                                           when they are clearly laid
    structure.”                                 the company can do for you, but what
                                                you can do for the company.’               out and are relevant to
   - GM Rao, Founder and Chairman,
    GMR Group (India)                           Values can also be creatively shared       employees in their daily
                                                and reinforced in family businesses        work.”
                                                involving more than one family (see
                                                case study on Al Shirawi Group,           - Simone Bagel-Trah, Chairwoman,
                                                                                           Supervisory Board, Henkel (Germany)
                                                “Building on shared values between
                                                families,” page 47).
                                                Values are more effective when            Values should be communicated
                                                explicitly communicated to customers      explicitly and clearly if they are to be
                                                and suppliers (see case study on          adopted across the family business
                                                Miele, “Always valuing independence,      and beyond (see case study on
                                                across generations,” page 41). That       illycaffè, “Taking the long view on
                                                is exemplified in South Africa by the     values for sustainable business,”
                                                approach taken by ZZ2, the country’s      page 23).
18 |   PwC Global Family Business Survey 2018

                                                 Projecting a vision for
                                                 business in society
                                                 Roche, Switzerland
                                                 André Hoffmann, Vice Chairman

                                                 When the Paris-based business school INSEAD received         and is rarely interested in its impact on society and the
                                                 a donation of €40 million in the summer of 2018, it was      environment. This needs to change, in his view.
                                                 the largest gift made by anyone in its 61-year history.
                                                                                                              “The economist Milton Friedman once said, ‘The
                                                 The donor was André Hoffmann, Vice Chairman of               business of business is business.’ So, what he was
                                                 pharmaceuticals group Roche and a member of the              saying was: ‘Let us make money, and the rest will take
                                                 family with a controlling shareholding in the group          care of itself. We don’t have to worry about externalities.’
                                                 since 1948.                                                  But this is clearly, to my understanding, not true,”
                                                                                                              says Hoffmann.
                                                 Yet the money – actually gifted in his name and that of
                                                 his wife, Rosalie – was not just an eye-catching case        “We need to look at financial returns, because without
Established             1896                     of corporate and personal largesse. It is being used to      that, there’s nothing. But you also need to look at
                                                 set up the Hoffmann Global Institute for Business and        environmental and social returns. We can satisfy
                                                 Society which, as an INSEAD announcement said at             shareholders; we can have a profitable business;
Current generation
                                                 the time, “promises to bring fresh perspectives and          we can have a forward-looking business. But we can
leading the             Fourth generation
business:                                        innovative solutions to the most intractable global issues   also minimise the impact of our footprint on society and
                                                 that threaten our sustainable future.”                       the environment. My dream is to position Roche and
Annual turnover                                                                                               many other companies into this territory where they
                        US$54bn                  The Institute will explore issues such as ethics, gender
(2017):                                                                                                       can become net contributors to societies – and not
                                                 balance, humanitarian operations, social impact,
                                                                                                              the opposite.”
                                                 sustainability, technology for good, wealth inequality and
Number of
                        93,700                   other topics related to the role of business in society.     Hoffmann, who earned a Masters in Business
employees:
                                                                                                              Administration from INSEAD in 1990, believes one of
                                                 These are issues of great importance to Hoffmann, who
                        Pharmaceuticals                                                                      the main ways the Institute can help to bring about that
Sector/s:                                        has a clear vision for the role of business in society
                         and diagnostics                                                                      change is by influencing how business is taught. “The
                                                 and in particular for how it gives his family’s business
                                                                                                              Institute for Business and Society aims at changing the
                                                 a clear purpose beyond generating profit. Business is
                                                                                                              norm in which business is taught,” he says. “We have
                                                 often too focused on short-term gains, Hoffmann says,
19 |   PwC Global Family Business Survey 2018

   to realise the way we teach business         security: we have the voting shares,    by his father’s commitment to                 For Hoffmann, all of this lays the
   management is only aligned on the            and we have a dividend certificate.     the environment.                              foundations for Roche’s legacy:
   single metrics, which is financial           That means that we are under the                                                      “I think that one of the legacies a
                                                                                        “I grew up in this conservation
   return. The rankings of business             scrutiny of every investor on the                                                     family business has is this long-term
                                                                                        environment, and I spent a lot of time
   schools are often based on the salary        planet, but we’re also able to take                                                   thinking. It’s this backbone that
                                                                                        trying to protect species. Today, I’m
   you earn when you graduate. But              long-term decisions because we have                                                   is always there, despite changes
                                                                                        more and more convinced that what
   judging success just on the amount of        the majority of the vote.”                                                            in fashion, despite the change in
                                                                                        matters is the interface between
   money you receive, as we know now,                                                                                                 technologies, despite digitalisation,
                                                This means that when the company        humanity and nature,” he says.
   is no longer suitable. And business                                                                                                despite all these challenges that the
                                                makes a decision, it is likely to
   schools need to wake up to this fact.”                                                                                             world is throwing at business.”
                                                influence the fifth and even sixth
   Purpose has a particular role to play        generations as well, says Hoffmann,     “I think that one of
   at Roche itself, too. “The purpose           who is a member of the fourth
   of Roche is not to make money;               generation of the family. “This
                                                                                         the legacies a family
   the purpose of ours is to satisfy a          means business thinking has to           business has is this
   community and in particular to satisfy       be transgenerational.                    long-term thinking.
   the patients’ community,” Hoffmann
   explains. “How can we create new
                                                “That’s what separates us from non       It’s this backbone that
                                                family-owned businesses. It’s the
   ideas which will make the life of the
                                                concept of sustainability, which, I’m
                                                                                         is always there.”
   patient easier and perhaps even
                                                glad to say, is much in favour at the
   cure them?”
                                                moment. And this sustainability is      When it comes to the more than
   A family business structure supports         lived by the family.”                   93,000 employees at Roche and its
   that purpose, thanks to the multi-                                                   future employees, Hoffmann believes
                                                To illustrate this, one need look no
   generational, long-term approach                                                     that having a strong sense of purpose
                                                further than Hoffmann’s early life.
   taken by many family businesses –                                                    is an excellent recruitment incentive.
                                                His father, Luc, was one of the co-
   including Roche, which was founded                                                   “How do we make sure that the
                                                founders of the World Wide Fund for
   by Hoffmann’s great-grandfather                                                      people who want to make an impact
                                                Nature and dedicated his working life
   Fritz Hoffmann-La Roche in 1896.                                                     on public health or even on disease
                                                to conservation projects. The younger
   The structure of Roche’s ‘hybrid’                                                    solutions come to Roche rather than
                                                Hoffmann was brought up in the
   ownership helps in this regard. The                                                  go to other businesses?” he says.
                                                Camargue region of France, where
   family has most of the voting shares                                                 “We need to be able to provide the
                                                his father had set up an institute to
   but doesn’t control the quoted shares                                                right environment and have sufficient
                                                protect the Mediterranean wetlands.
   on the stock exchange, Hoffmann                                                      stability while still maintaining a certain
                                                And he was deeply influenced
   explains. “So, we have two types of                                                  amount of excitement.”
20 |   PwC Global Family Business Survey 2018

   Five principles for getting                                                                         Peter Englisch,

   value from your values
                                                                                                       Global and EMEA Family
                                                                                                       Business Leader, PwC Germany

   1. Be specific about your values: codify them, write them down and act on them. Do this with the full involvement of family
      members. This will strengthen not only your family cohesion but help you make better decisions for the family business.
   2. Communicate your values internally and externally to activate your family business advantage. Many family businesses
      have values but don’t always bring them to others’ attention. You can’t get value from your values if you don’t
      communicate them.
   3. Develop business principles and a code of conduct that brings your values to life. This helps build trust and credibility
      internally and externally and open doors for new business partners.
   4. Put values at the forefront of your recruitment efforts and embed them into your workplace, as you seek to bring the
      best talent to your business. Displaying your values is a good way to attract and retain the best talent for your business.
   5. Focus on value creation along the entire value chain, such as ensuring that you work according to shared ethical
      standards. Your values have a mutually reinforcing impact beyond your own business.
21 |    PwC Global Family Business Survey 2018

                                                  Bringing values to life
                                                  Ferd, Norway
                                                  Johan H. Andresen, Owner and Chairman

                                                  “Ask not what the company can do for you, but what       on tobacco companies from governments and anti-
                                                  you can do for the company.”                             tobacco groups, the family decided tobacco was no
                                                                                                           longer a business they wanted to be in.
                                                  It would be hard to beat this for originality and
                                                  creativity as a family business mission statement,       They sold off the tobacco interests and established
                                                  paraphrased, of course, from former US president         Ferd, which has holdings in a range of businesses,
                                                  John F. Kennedy’s most resonant quote.                   including some highly successful non-listed
                                                                                                           companies. Many of these are in Norway’s energy
                                                  But for Norwegian business leader Johan H.
                                                                                                           sector, like oil and renewable energy services
                                                  Andresen, it is simply an effective way to express
                                                                                                           company Aibel; oilfield technology business Interwell;
                                                  how he and his family have approached defining,
                                                                                                           and the country’s biggest ferry operator, Fjord Line.
                                                  articulating and living the values that drive the Ferd
                                                                                                           Ferd (from a Nordic word for ‘journey without an end’)
                                                  group of companies, which operate in the Nordic
                                                                                                           also invests in publicly-listed stocks, hedge funds
       Established:            1849               region. In essence, the family decided that it had
                                                                                                           and real estate. The Oslo-based investment group
                                                  to live up to the company’s long-cherished values,
                                                                                                           has also pioneered social entrepreneurship and
                                                  rather than the other way around.
       Current generation                                                                                  pursued many so-called impact investments – those
       leading the             Fifth generation   Pinpointing this distinction was part of deliberations   designed to create a social or environmental benefit.
       business:                                  that took place 20 years ago at an important juncture
                                                                                                           When Ferd was created, Andresen, his family and
                                                  in the trajectory of the family’s business interests.
       Annual turnover         30.8bn                                                                      those running the new business felt able to set out
       (2017):                 Norwegian Krone    Ferd’s origins go back more than 160 years,              a properly defined set of values. Although a set
                                                  when Andresen’s great-great-grandfather, also            of family values had guided the legacy business
       Number of                                  called Johan, bought a tobacco company called            for almost two centuries, they decided they really
                               8,857
       employees:                                 Tiedemanns, which became the basis of the family         needed values to guide the company and the family’s
                                                  business. Tiedemanns soon became one of the              interaction with it.
                               Conglomerate,      biggest tobacco firms in Scandinavia. The family
                               industrial                                                                  “Previous to establishing Ferd, we as a family
       Sector/s:                                  used money from Tiedemanns to diversify into
                               and financial                                                               internalised our values,” explains Andresen. “They
                               investments
                                                  shipping, publishing, packaging and consumer
                                                                                                           were good, old-fashioned types of values, like
                                                  products. But in the 1990s, with increasing pressure
22 |   PwC Global Family Business Survey 2018

   Bringing values to life (cont.)

   honesty, dedication and loyalty. But         Credibility is very important to Ferd,        when it comes to evaluating returns.        who built a business empire endures.
   they weren’t something that drove the        says Andresen. It means something             But Andresen feels Ferd has added           Andresen says he honours that
   business. Once we established Ferd,          more than trust. “Credibility isn’t           a new twist to the concept. “I’ve           through his efforts beyond Ferd, such
   we tried to make a conscious set of          something you have. You can’t buy it;         reformulated the traditional idea of the    as setting up a microfinance fund and
   assigned values – more precisely,            you can’t make it up and say you’re           long term with the idea of ‘we can be       Ferd’s social enterprise efforts. He
   values we would like people to talk to       more credible today than you were             impatient for a very long time.’ In other   is also chair of a council of ethics for
   us about, in those terms.                    yesterday. Credibility is different           words, the concept of the long term         Norway’s oil fund, one of the world’s
                                                from trust; it means that you actually        for a family business is not a resting      biggest sovereign wealth funds. “As
   “We weren’t going to take our family
                                                believe in someone who’s doing                point; it isn’t a pillar that enables       family owners, we always said the
   values and say, ‘The business
                                                something they’ve never done before           things to fix themselves. No, things        leader doesn’t just lead in a closed
   should be like this’. You might say
                                                – and that is something we are doing          won’t fix themselves. You need to           company. They have two roles. One
   the company’s values overwrite the
                                                all the time. We always do something          be constantly impatient for success,        was to run the company, and the
   family’s values.”
                                                we haven’t done before.”                      but against the background of long-         other was to play an active role in
                                                                                              term objectives.”                           society. Successive generations have
                                                Andresen says this idea of credibility
                                                                                                                                          tried to live up to that responsibility.
   “Of course, there is a                       is also an important factor in Ferd’s         A strong indication that values
                                                                                                                                          All these things stretch and modernise
    legacy, all the stuff we’ve                 efforts to attract the best talent. “The      are also important in generating
                                                                                                                                          the legacy,” Andresen says. “You’re
                                                people we are trying to hire have             deal flow is that the most recent
    done. But let’s look at                     an option. They can go elsewhere              investments made by Ferd were in
                                                                                                                                          making a legacy outside of the
                                                                                                                                          company that feeds back to the
    what we are going to do.                    because they have a huge amount of            two other family businesses where the
                                                                                                                                          values of credibility.”
                                                potential; everyone wants them. But           owners selected Ferd as their partner
   That is the best way of                      if you’re a values-based owner with           over other suitors.
    having a legacy.”                           credibility, those high-potential people
                                                                                              Family businesses like Ferd that
                                                select you.”
                                                                                              reinvent themselves perhaps don’t
   That’s where Kennedy’s aphorism              Part of the hiring effort is geared           get too bogged down with the idea of
   comes in. “The family’s values are a         towards the ‘team play’ value. And            legacy. As Andresen says: “Of course,
   reflection of [that],” says Andresen.        Andresen says the fact that Ferd has          there is a legacy, all the stuff we’ve
                                                little staff turnover is a testament to its   done. But let’s look at what we are
   They laid out the company’s values
                                                success in recruiting team players.           going to do. That is the best way of
   in four points: credibility; a spirit of
                                                                                              having a legacy.”
   adventure; team play; and a long-term        Family businesses often take a long-
   view of goals and success.                   term view in their decision-making            That said, the impact of five
                                                processes and value the concept               generations of the Andresen family
23 |    PwC Global Family Business Survey 2018

                                                  Taking the long view on values for
                                                  sustainable business
                                                  illycaffè, Italy
                                                  Andrea Illy, Chairman

                                                  During a global coffee crisis from 1998 to 2002,          Francesco, who started the business in 1933, and
                                                  prices skyrocketed, consumption fell and the              their father, Ernesto, who ran it until 1994. The
                                                  euro was in turmoil. Instead of cutting staff or          company’s purpose is to deliver the world’s best
                                                  renegotiating supplier contracts, Italy–based illycaffè   cup of coffee by pursuing excellence for everyone
                                                  – more commonly known as illy – stayed its course,        involved. Even more simply, illy is about happiness.
                                                  holding fast to its policies.                             “That’s the real goal in life,” says Illy. “In order to be
                                                                                                            creative in your life, you need to be inspired, and in
                                                  “We just sacrificed our profit in the short term
                                                                                                            order to be inspired, you need to be happy.”
                                                  for the long term, maintaining financial stability,”
                                                  says Andrea Illy, the founder’s grandson and              The company’s values underscore that mission.
                                                  the company’s chairman. “We started working               One is to “create and share superior stakeholder
       Established:            1933               immediately to improve our situation and recover as       value over time through our commitment to
                                                  soon as possible after the crisis.”                       improvement, transparency, sustainability and people
       Current generation                                                                                   development.” Another is to inspire everyone in the
                               Third and fourth   This approach to weathering business challenges
       leading the                                                                                          value chain – “from bean to cup” – to create what the
                               generation         by taking the long view is typical of many family
       business:                                                                                            company calls “beautiful experiences” and products
                                                  businesses. Liberated from quarterly financial
                                                                                                            to delight customers.
       Annual turnover                            demands, they are freer to put the needs of
                                €467m             employees, suppliers, customers and society first.        Pursuing that mission has not always been a smooth
       (2017):
                                                  Their competitive advantage comes from benefitting        process. Following the dissolution of an international
       Number of                                  all stakeholders, not just those with financial stakes.   coffee agreement in the late 1980s, which fixed
                               1,290
       employees:                                 And at a time when there is a heightened sense that       prices and guaranteed quantity and pricing quotas,
                                                  business should be about a purpose beyond profit,         a black market thrived and prices plummeted.
                               Beverages and     illy’s approach serves as a good example.                 Meanwhile, new coffee exporters like Vietnam
       Sector/s:
                                coffee
                                                                                                            emerged, leading to oversupply and lower prices. The
                                                  Andrea Illy, his sister and two brothers stay true to
                                                                                                            market was flooded with often low-quality coffees.
                                                  the purpose and values set by their grandfather,
24 |   PwC Global Family Business Survey 2018

   Taking the long view on values for sustainable business (cont.)
   In 1990, Andrea Illy, armed with a           20,000 people a year in 25 countries,      In the end, it’s about values. The        the company’s more than 100,000
   chemistry degree, joined the family          including not just farmers but also        company prioritises the needs of          retailers, cafes and shops. They all
   business as a quality supervisor.            people who serve and enjoy coffee.         stakeholders like farmers over its own    make it possible to get illy coffee
   To ensure illy was delivering on its                                                    family of shareholders, continuing        into the hands of its customers in
                                                To keep its suppliers thriving and loyal
   mission to make the world’s best                                                        to pay farmers premium prices             140 countries.
                                                to the company, illy pays on average
   coffee – and bought only the highest                                                    even when times are tough. Their
                                                30% over market value for its higher                                                 Last but not least is the family, which
   quality beans during this tumultuous                                                    businesses must be sustained just like
                                                quality beans. It also keeps dividends                                               is there not to enrich itself but to serve
   period – he made some changes.                                                          their coffee crops. “For a company
                                                for shareholders modest and invests                                                  the company and the community.
   Inspired by practices he saw in                                                         founded on ethical values, it’s very
                                                most profits in the company to further                                               “This is our philosophy,” says Illy.
   Japan, Illy developed a ‘total quality’                                                 hard to accept that you are basically
                                                improve quality.                                                                     “This is our family business.”
   programme to set standards at the                                                       enriching people’s lives with a well-
   company and for the industry.                                                           being of coffee and you cannot give
                                                                                           back to those who produce the
   Then, in 1991, the company began             “For a company founded
                                                                                           product,” adds Illy.
   directly sourcing beans from coffee           on ethical values, it’s very
   growers in Brazil to guarantee                                                          Illy calls this a virtuous cycle in
   a reliable supply of high-quality,            hard to accept that you                   which everyone benefits. He thinks
   sustainably farmed beans.                     are basically enriching                   of the company as a ‘shared-
                                                                                           value company,’ one in which
   To be sure that its suppliers’                people’s lives with a
                                                                                           competitiveness and the health
   practices truly were sustainable for          well-being of coffee and                  and success of its communities are
   the environment and society – in
   2011 – illy partnered with DNV GL            you cannot give back                       inextricably linked. Companies
                                                                                           aren’t profit machines but rather
   Group, an international certification         to those who produce                      social institutions that use profits to
   body. Today, illy is audited on more
                                                 the product.”                             create well-being for stakeholders,
   than 60 important performance
                                                                                           explains Illy.
   indicators. To share knowledge and
   passion for coffee all around the            “The better quality we offer to our        And the consumer comes first. “My
   world as well as teach sustainability        consumer, the more they will drink and     father used to say the consumer is the
   and environmentally responsible              the higher premium they will pay, and      owner; we are not the owner. He or
   cultivation, along with better business      this can be reinvested for growth and      she is the real boss,” Illy says.
   practices, illy set up the ‘University       development for those who produce
                                                                                           Next come the suppliers, other
   of Coffee.’ Twenty years on, the             it,” says Illy.
                                                                                           partners and about 1,200 staff at
   university educates more than
25 |   PwC Global Family Business Survey 2018

   Pursuing purpose
   Business leaders are talking more than ever
   about finding the right balance between the profit
   motive in business and a heightened sense of
   purpose that runs through the C-suite.
26 |   PwC Global Family Business Survey 2018

   The purpose of an enterprise is its          legislate morality. Examples include      In our survey, 68% of family businesses   “If I were to speak from
   reason for existence: the expectations       a UK requirement that companies of        globally had a documented vision and
   you have about what products and             a certain size report their gender pay    purpose, or mission statement, for         my heart, the most
   services you produce, why those              gaps; regulations in China to more        their company.                             important part of the
   create value and what you will do            aggressively tax polluters; and laws
                                                                                          “A family business without a               business is that we
   with the value you create in the world.      in South Africa obliging companies to
   Beyond making money, your purpose            value non-financial stakeholders the
                                                                                          common purpose won’t survive,”             are two families. It
                                                                                          says Dr. Peter May, Family Business
   might include providing for your             same way as financial stakeholders.
                                                                                          Consultant and Strategic Adviser to        is our greatest value
   family and community, fostering an
   innovative way to improve the world
                                                                                          PwC’s family business practice in          as a business – this
                                                                                          Germany, “particularly in the turbulent
   at large or realising another aspiration.    “My father used to say the                                                           cooperation between
                                                                                          environment we’re in at the moment
   The family originally founded or
                                                 consumer is the owner.                   when everything is changing, whether       the families.”
   acquired this business for a purpose,
                                                                                          it be digitally or with the political
   and unless that has changed, you are          We are not the owner. He                 uncertainty we see globally. Family
                                                                                                                                    - Sumeet Valrani, Director
   still here to realise it.                                                                                                         Al Shirawi Group (United Arab Emirates)
                                                 or she is the real boss.”                businesses must be clear: what is our
   Today, business leaders are talking                                                    reason to stand together for the next
                                                -Andrea Illy, Chairman,
   more than ever about finding the                                                       20 to 30 years and the next generation
                                                 illycaffè (Italy)
   right balance between the profit                                                       to come?”
   motive in business and a heightened
   sense of purpose that runs through           Survey after survey shows that the
   the C-suite. Corporate malfeasance           millennial generation, which makes up
   has increased public distrust and led        a sizeable portion of the workforce in
   government leaders to attempt to             most countries, expects companies
                                                to contribute to society, have a clear

  “When we do things,                           purpose based on values and be            “The purpose of Roche
                                                more sustainable. They want to work        is not to make money;
   we have to think about                       for companies they feel good about
   how other people might                       and tend to buy from those that            the purpose of ours is to
   be affected by our
                                                meet their ethical standards. To be        satisfy a community and
                                                accountable in this way, businesses
   actions and take these                       will increasingly need to track their
                                                                                           in particular to satisfy the
   into account.”                               activity and its impact. Roche, the        patients’ community.”
                                                pharmaceuticals group, has a clear
                                                                                          - André Hoffmann, Vice Chairman,
   - Eddy Lee, Director,                        sense of community purpose (see case       Roche (Switzerland)
    Lee Kum Kee (Hong Kong)                     study on Roche “Projecting a vision for
                                                business in society,” page 18).
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