Moreover, family business owners and managers are reasonably bullish about growth perspectives in the next five years, with 61% indicating that they expect their companies to grow steadily, while 13% aim at an aggressive growth, including through mergers and acquisitions. Around one quarter of Romanian family businesses are rather cautious about the future and plan to consolidate their structure at the current turnover level.
The Results of the PwC Family Business Survey Romania 2013 are well aligned with those at the global level, where 69% of respondents aim for steady, organic growth, while 12% pursue more aggressive growth strategies.
Challenges ahead
When it comes to challenges for their organization, most family business owners and managers focus on external factors, such as the market conditions (52%) or increasing competition (32%). 42% of the respondents are concerned about the tax regime and 29% about regulation and government policy. On a more positive note, concerns connected to the availability of finance, a pressing issue in the wake of the global financial crisis, seem to have subdued, with only 13% of respondents quoting this as a challenge for their organization. Also, there seems to be confidence in the capacity of the Romanian National Bank to control exchange rate volatility, with only 16% of respondents voicing concerns over this issue, as well as about the interest rates levels.
With still weak connections to external markets and a smaller proportion of exports in overall turnover, Romanian family businesses seem less concerned about the European economic crisis, with only 13% of respondents indicating this as a threat.
In terms of internal challenges within their businesses, respondents are preoccupied about staff recruitment and retaining (39%), with most family business owners and managers fearing that they are being put to an unfair disadvantage with multinational firms over attracting the best employees, due to differences in remuneration and career track perspectives.
32% of respondents plan to focus on reorganizing their companies in the years to come, while 26% worry about production capacity and capability to meet the orders of their customers. The pressing issue of cash-flow management and cost control seems to have been mitigated to a large extent, with only 19% of respondents quoting cost-cutting as a pressing challenge and only 10% focusing on tax planning and optimisation.
Over the next five years, Romanian family firms express concern about the general economic situation, with 81% identifying this as the single most pressing issue. Entrepreneurs seem aware that they need to continue to innovate (55%) in order to maintain their competitiveness. Also, they see that increased competition is putting pressure on fees and prices (55%), while attracting and retaining key talents will remain a prime concern (48% and 45% respectively).
On the other hand, little attention is being given to important factors such as devising a sound succession plan. Around one third of the respondents identified this as a key challenge over the medium run, with no owner or manager indicating that they see potential family conflicts as a challenge over the next five years, which seems an underestimated risk at best, if not even wishful thinking.
How family businesses differ
Quicker and more flexible decision-making
Given their rather flexible nature, family businesses believe they are more agile than multinational or public companies. They adapt faster to change and are quicker to identify and to follow-up on opportunities.
Not to mention, investing personal capital in a family business gives a different weight to the decision-making process.
Higher involvement and responsibility
Both owners and employees are more engaged in the activities and preoccupied with the results, taking direct responsibility for the business’ failures and successes. There is a stronger commitment to employees, to customers, and to the business itself. This also reflects in the behaviour of the employees, which are more loyal and stay longer with the business.
Overall, there is a higher responsibility towards suppliers and customers – a responsibility that actually works both ways. The family business is part of the local community.
Simpler management structures and less bureaucracy
Relationships are more personal as there is a shorter chain of management and information flow more directly. The dynamic is based on the family, on the business and on the ownership, which brings about a strong ethic of social control, justifying the family business’ preference for unwritten rules over formalization.
An entrepreneurial spirit doubled by creativity
The family business needs to constantly reinvent itself just to keep up with the market. It is always trying to find the best solutions and related strategies for coping with change.This seems to be the winning recipe. Even in a context of economic uncertainty, family business world-wide appear to be thriving (65% have grown sales in the last year, particularly in Eastern Europe, Latin America and the Middle East).
Family businesses and the role of Society and Government
Family firms’ managers and owners see their companies as having a distinct identity on the market with unique and strong values. Therefore, 84% of the respondents state that they do all they can in order to retain staff, while 77% declare that they feel a sense of responsibility to support employment in areas in which they operate. Also, they show a sense of responsibility to support local community initiatives, thus contributing to the general development of the region in which they are based.
While private companies’ owners and managers see themselves as a source of stability and job creation in the national economy, they feel frustrated that their role is not recognized and appreciated enough by public authorities. This feeling is shared by most entrepreneurs around the world, but in Romania this perception is particularly strong, with 81% of respondents declaring that the Government does not recognize the importance of family businesses, with only Greek entrepreneurs having a more acute sense of estrangement. Romanian entrepreneurs feel also that the Government doesn’t do what it can to help businesses survive and develop.
Family Business and Society and Government
Confronted with a difficult lending environment, as banks are keeping their purses tight, while private companies are reluctant to go public, entrepreneurs feel that the state should play a more active role in facilitating access to financing.
Moreover, local entrepreneurs feel the inadequacy of the Romanian education system as they complain about the poor quality of fresh graduates. 58% of family firms’ managers and owners stated that young people don’t have the right skills in order add value to their employers.
Family firms managers and owners would like to see the Government take some initiatives to relive the tax burden by applying exemptions for profit tax in case of reinvested profits and make such measures actually working in practice. They would also like a legislative simplification and a reduction in bureaucracy and red-tape. Another request would be for the Government to offer support in accessing new markets, by offering state-guarantees, but also support in business development, networking and marketing activities. They would like state loans for acquiring new technologies that would allow them to boost productivity and increase competitiveness.
Conclusions
Romanian family businesses know they play an important role in the economy, but don’t think the government recognises it at the real value.
They want the government to level the playing field by making it easier to access finance and by removing the tax on reinvested profit or to assess other tax incentives.
They identify the need to innovate as a key challenge in the years ahead and as another area where the government or other bodies could potentially help and support them.
Romanian family businesses seem to consider the procedures addressing family conflict although, somewhat surprisingly, none of them thinks family conflict will be a challenge over the next five years. Furthermore, one aspect that family businesses will have to address in the coming period (although some of them have started to do so) is related to the succession planning for the transfer to the new generations of owners.
Survey methodology
1,952 semi-structured telephone interviews were conducted via Kudos Research in London with key decision makers in family businesses across 28 countries worldwide in Q3 2012. The interviews were conducted in the local language by native speakers and tended to average between 20 and 35 minutes. The results were then analysed by Jigsaw Research. 31 interviews were conducted in Romania.
Read the full report in pdf document attached.
