No Match Found
In a world marked by uncertainty and increasing polarisation, “business as usual” no longer exists. For family businesses, the rapidly changing business landscape demands a fundamental reimagining of how trust is built and nurtured.
As demographics shift, the next generation of consumers, employees and business owners have now come of age. Made up of millennials and Gen-Z, they bring with them distinct values and a sense of purpose that diverge from the baby boomer generation. Firmly in the driver’s seat when it comes to issues such as sustainability, diversity and inclusion, they are the catalyst for redefining the trust formula.
Trust is a vital ingredient for the success of family businesses. Yet, PwC’s Global Family Business Survey 2023 reveals that Asia Pacific family businesses remain behind the curve when it comes to building and sustaining that trust. The survey captures insights on the current thinking and future plans of 2,043 family business leaders from 82 territories, out of which 630 (almost one-third of participants) come from Asia Pacific.
Our survey findings show that family businesses in Asia Pacific are still relying on the trust premium built up by previous generations. Protecting and nurturing that trust premium is pivotal so Asia Pacific family businesses can achieve their long-term goals:
As business dynamics and societal expectations change, the notion of how to build trust in business has also evolved. Asia Pacific family businesses must now consider new groups of stakeholders who have distinct views on what constitutes trust. Without trust, it can be challenging to drive growth and preserve the long-term legacy of the business in the current landscape, which is why family-owned firms must reassess their priorities and adjust their strategies accordingly.
Our survey findings reveal a need to bridge the trust gap between family businesses and three key stakeholder groups: customers, employees and family members. Beyond these three groups, it is also essential for Asia Pacific family businesses to expand the trust quotient to include the public. This is critical to enhance reputation, build loyalty and propel the business forward.
Environmental, social and governance (ESG) and diversity, equity and inclusion (DEI) issues have increasingly become litmus tests for trustworthiness in the public domain. This changes the playbook - quality products and services, as well as brand recognition, are no longer enough to sustain long-term success.
Asia Pacific family businesses need to double down on both showing and telling - by increasing the visibility of their commitments to ESG and DEI issues and proactively communicating their strategies to the public to enhance credibility.
|The stakeholder groups have expanded:
|And expectations have grown:
|Family businesses should expand their toolkit to meet these expectations:
|Quality product / service
|Annual report letters
|Commitment to ESG and DEI
Let’s take a deeper dive into reimagining the new trust formula with the following key stakeholder groups:
According to our survey, the majority of Asia Pacific family businesses feel it is important to be trusted by customers. Earning the trust and loyalty of customers, the lifeblood of any business, is crucial for long-term success. Yet, less than half believe they are fully trusted by their customers.
While it is encouraging to find that most of Asia Pacific family businesses have a clear company purpose, they fall short when it comes to actively communicating this to external stakeholders.
The new cohort of millennials and Gen-Z who have entered the workforce and have become consumers are more likely to support businesses which align with their beliefs, especially on social and environmental issues. Asia Pacific family businesses are slow to grasp this changing narrative - there is evidently a lack of leadership when it comes to championing ESG and DEI:
Survey findings indicate that more than half of Asia Pacific family businesses acknowledge an opportunity to lead the way in sustainable business practices, but many admit that little focus, energy and resources are being invested into ESG.
According to PwC’s December 2022 Global Consumer Insights Pulse survey, ESG factors are increasingly influencing the purchasing decisions of consumers. In emerging Asian economies, 50% of consumers will consider the ESG profile of companies and products while making their buying choices, which reflects the importance of ESG credentials as evident in the new trust formula.
To leverage this trust, businesses need to establish a clear ESG narrative, enabling two-way communication with customers.
Family businesses recognise the impact of employee trust on overall performance and sustainability. According to our 2023 Global Family Business Survey, 76% of Asia Pacific family businesses agree that growth and profit should not come at the expense of customers or employees.
While employee trust is highly valued by Asia Pacific survey respondents, the reality does not align with this conviction, as less than half of them believe that they are fully trusted by their employees.
Less than half of the leaders (owners and CEOs) of Asia Pacific family businesses feel they are performing well when it comes to establishing trust with employees. 45% believe they have worked hard to create an atmosphere of trust within the team, while 40% feel they have been able to build positive relationships with team members. There is still room for improvement when it comes to cultivating a culture of trust with employees.
Despite acknowledging the significance of employee trust, many family businesses are not taking enough action to strengthen it, whether by communicating a clear purpose or committing to advancing DEI. Attracting and retaining key talent as a priority can suggest a heightened awareness of DEI, as companies show that they foster an inclusive workplace where employees feel valued. However, our survey results show that 45% of Asia Pacific family businesses indicate that talent retention ranked low on their priorities, suggesting that they do not fully appreciate the importance of DEI.
Unlike our global survey results, which show a strong focus on attracting and retaining talent, Asian family businesses need to do more to narrow this gap.
Our survey shows that almost three quarters of Asia Pacific family business leaders believe they have built trust between family members, which suggests they are more likely to collaborate effectively towards a common goal. Although a third admit that levels of trust are lower with certain types of family members, communication between family members remains high. The results also indicate that family members have a unified vision for the business - more than half feel that members are aligned on the future direction of the company and more than three-fifths believe there is a clear sense of agreed values and purpose for the business.
When it comes to governance, only 61% of Asia Pacific family businesses surveyed have a clear or formal governance structure in place. Robust governance practices are a representation of a business’s purpose and values. A lack of formal governance structure could impact how a business is managed and perceived.
The board composition of many Asia Pacific family businesses is steeped in tradition, reflecting the past, rather than the present or the future. This also reinforces the survey findings that ESG and DEI are not high on the agenda for these family-run companies, as they are dominated by men and by those who are above 40 years old. There is clearly room for greater diversity in the boardroom so fresh perspectives can be brought to the table.
To adapt to the new trust formula, family businesses need to take a transformative approach to demonstrate that they understand the changing priorities of stakeholders. They can build trust by implementing defined and visible measures that address the concerns that matter most to a broader group of stakeholders.
The 3 key actions family businesses should take to transform to build trust include:
To safeguard, sustain and secure their business legacy, family-run businesses must actively take transformative changes to build trust. They must ensure that their efforts are visible and communicated clearly to all customers, employees, family members, as well as the wider public. When credibility with key stakeholders is firmly established, business growth will be the natural outcome.
“Trust has a significant impact on business performance. As the formula for trust evolves, family businesses must reframe their approach for engaging with customers, employees and family members. Transparency and accountability play a big role in helping to earn, win and sustain the trust premium with these key stakeholders.”
PwC’s Family Business Survey 2023 is an international market survey of family businesses. The goal of the survey is to get an understanding of how family business leaders perceive their companies and the business environment. The survey was conducted online in collaboration with the Family Business Network International (FBN). The survey conducted 2,043 interviews in 82 territories between 20 October 2022 and 22 January 2023.
Ng Siew Quan
Asia Pacific Leader, Entrepreneurial and Private Business, PwC Singapore
Tel: +65 9726 9880