Family firms fail to exploit digital potential

Irish family businesses are among the least prepared to take advantage of commercial opportunities presented by an increasingly digitalised business environment.

However, a vast majority remain confident that their firms will grow in the coming years.

Ireland scored among the lowest of the 40 countries surveyed worldwide as part of the PricewaterhouseCooper (PwC) Family Business Survey in terms of understanding the commercial potential of digital, as well as being less likely than their global counterparts to adapt work practices to exploit digital opportunities.

Fewer than half understand the tangible benefits of embracing digital and fewer than a third place attracting key digital skills as a top priority, compared to 43% globally.

“Seizing the digital opportunities will be critical to stay ahead of the competition and the survey suggests that Irish family businesses have some way to go compared to their global counterparts in understanding the full benefits of digital and adapting their organisations to the world of digital,” said PwC partner John Dunne.

Despite lagging behind their international counterparts in the digital sphere, Irish family businesses are strongly optimistic for the coming years, with 85% predicting growth in the next five.

Such confidence is driven largely by the expansion some companies have already experienced with nearly two-thirds of family businesses reporting growth in the last year.

Almost a third are also looking to strengthen their growth prospects by expanding into international markets with the UK (43%) proving the most popular market with emerging economies such as China (10%), Africa (10%) and the Middle East (9%) also featuring strongly.

Fewer than one in 10 of Irish family businesses reported plans to target the US, however.

The survey, which is carried out every two years, also highlighted a strong desire among business owners to professionalise their firms, including putting in place infrastructure and processes around communication, decision-making and conflict resolution.

More than a quarter reported a need to professionalise their businesses while staff recruitment has also become a key constraint to growth among 60% of respondents with access to finance being a key concern for a third of businesses, up from 13% in 2012.

Speaking at the launch of the survey, PwC Irish family business leader, Paul Hennessy said professionalising the business helps firms innovate better, diversify more effectively and grow faster.

Putting in place a comprehensive succession plan also remains a challenge for businesses with 55% of respondents having no such plan for key senior roles, as opposed to 44% globally, while only one in 10 have a robust and fully documented plan in place.

The last two years have seen firms become far more open to bringing professional management on board and are also more likely than their global counterparts to sell or float the business rather than to pass it on to the next generation. Just 33% plan to pass the firm onto the next generation, down from 55% in 2012.

Priorities have also changed in the last two years with firms much more focused on remaining in business and improving profitability than in 2012