IN today’s dog-eat-dog business space, entrepreneurial drive alone is no longer adequate for family businesses to thrive.
Instead, the strong entrepreneurial drive ought to be complemented by a high level socio-emotional wealth and motivational leadership styles to ensure sustained performance of family businesses.
Such is the findings from a survey by KPMG Private Enterprise and the STEP Project Global Consortium in a recent report entitled “The Regenerative Power of Family Businesses: Transgenerational Entrepreneurship” which analysed insights from 2,439 CEOs and other top family business leaders across 70 countries, including 56 respondents from Malaysia.
The study looked at the common factors that make up the formula for family business resilience and regeneration.
The findings arising out of Malaysia’s family businesses uncovered three contributing factors for success, specifically:
Entrepreneurial orientation: Continuous entrepreneurialism is a source of sustained competitive advantage in Malaysia’s family businesses because it is built on two factors that are difficult to imitate – (i) the capabilities and resources of the family itself; and (ii) the company’s entrepreneurial heritage.
The study found that family business executives in Malaysia reported a high level of proactiveness at 62% followed closely by the risk-taking trait (53%). There also appears to be a strong opportunity-seeking mindset among Malaysia’s family businesses – continuously taking pre-emptive actions that shape the competitive environment that other companies are forced to react.
However, lagging significantly behind at 20% is innovativeness – the propensity to invest in the research and development of new products and services and operating practices.
Socio-emotional wealth: Maintaining family control is seen as a priority (54%) among Malaysia’s family businesses to ensure sustainability of the core business through slow and steady growth. For many respondents, socio-emotional wealth is seen as an endowment – one that the family values and protect beyond financial wealth.
Motivational leadership: A majority (59%) of Malaysian family businesses still engage an authoritarian leadership style where the primary impact is seen in the strength of family bonds
and their emotional attachment to the business.
But there’s a growing number of family businesses that engage in transformational leadership style (48%) where leaders are open to changing basic values, beliefs and attitudes in an effort to motivate their “followers” to do more and perform beyond expectations.
“Leadership styles should not be overlooked as a critical factor affecting the performance of family businesses,” commented KPMG Private Enterprise’s family business and tax leader Tai Lai Kok.
“In a post-COVID landscape devoid of predictability, fuelling the regenerative power of family businesses will require more transformational leadership to ensure that family businesses continue to evolve successfully and at speed.”
Other key findings from the KPMG Private Enterprise and The STEP Project Global Consortium report include:
- Family businesses with a high level of entrepreneurial orientation, diversity and a transformational leadership style showed higher financial and non-financial (ie social capital and emotional connection) performance than others.
- Family businesses with low levels of both entrepreneurialism and socio-emotional wealth have the most significant opportunities for improvement. The companies in this category exhibit a wide diversity in the size of the business and the number of businesses they operate, with one-third reporting they operate multiple businesses.
- Malaysian family business owners recognise the importance of performance beyond financial wealth for the sustainability of their businesses – putting a greater emphasis on non-financial and internal social performance such as development of next-generation skills and opportunities and diverse hiring practices. These businesses tend to exhibit medium-to-high level of socio-emotional wealth. – June 15, 2022
