THE VALUES EFFECT PWC GLOBAL FAMILY - HOW TO BUILD A LASTING COMPETITIVE ADVANTAGE THROUGH YOUR VALUES AND PURPOSE IN A DIGITAL AGE
←
→
Page content transcription
If your browser does not render page correctly, please read the page content below
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
2 | PwC Global Family Business Survey 2018
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.
3 | PwC Global Family Business Survey 2018
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
4 | PwC Global Family Business Survey 2018
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
5 | PwC Global Family Business Survey 2018
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
6 | PwC Global Family Business Survey 2018
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.
7 | PwC Global Family Business Survey 2018
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
8 | PwC Global Family Business Survey 2018
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
9 | PwC Global Family Business Survey 2018
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
10 | PwC Global Family Business Survey 2018
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 into11 | 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 point12 | PwC Global Family Business Survey 2018
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,13 | PwC Global Family Business Survey 2018
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.14 | PwC Global Family Business Survey 2018
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 Business15 | 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 more16 | 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 pressure22 | 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 family23 | 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 than25 | 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).You can also read
