A new report by PwC, a leading financial advisory organisation, has indentified economic environment, corruption and regulation as the top challenges affecting the performances of family businesses in Nigeria. The study, however, says many of the businesses are weathering the storm owing to strong business values cultivated over the years.
The report titled PwC’s 2018 Family Business Survey was unveiled at an event attended by top business executives and regulators in Lagos on Thursday.
PwC, in the report, has urged family businesses to maximise the competitive advantage that comes from their strong values-led culture.
The survey is a global market study among key decision makers in family businesses within a number of PwC’s key territories with a view to understanding family business executives’ thoughts on key contemporary issues.
Themed ‘building a lasting competitive advantage through your values and purpose in a digital age’, this year’s edition says family business leaders reported robust performances last year, with growth hitting its highest level since 2007.
According to the well-researched document, growth among Nigerian family businesses in the year reviewed was lower than the global average. It shows that 53 per cent of the operators reported growth as against the 69 per cent global average.
However, 87 per cent of the respondents, according to the survey, expect to grow in the next two years, with 40 per cent saying that “growth will be quick and aggressive”.
A statement by the firm says: “The top three challenges cited by Nigerian family businesses as militating against the personal and business goals are economic environment (70 per cent), corruption (67 per cent) and regulation (57 per cent). Corruption, which PwC estimates could cost up to 37 per cent of Nigeria’s GDP by 2030 if unchecked, is associated with lower investment, higher prices as well as (causing) barriers of entry for businesses.
“Most strikingly, the 2018 edition of the survey demonstrates a link between putting values at the heart of strategic planning and strong growth prospects. While 67 per cent of Nigerian family businesses have a clear sense of agreed values and purpose, less than half (43 per cent) of respondents have those values articulated in written form.”
Uyi Akpata, Country Senior Partner, PwC Nigeria, says: “The message is clear: adopting an active stance towards company values generates practices that pay off in real terms. A commitment to a clearly defined set of values can act as an ‘inner compass’ and provide a competitive edge for a family business as it navigates the challenges of technological and competitive disruption.
“What this survey clearly indicates, however, is that family business values are not simply the same as family values. Business values should be clearly defined and articulated; they should also be strongly embedded in the business culture and the day-to-day decision-making regularly reviewed.”
Esiri Agbeyi, Partner and Head of Private Wealth Services, PwC Nigeria, adds: “A key take away from our findings is that there is an opportunity for family business owners that are committed to and adhere to a deep sense of social responsibility and sustainability to invest their resources in a manner that is consistent with their values.
“Also, the next generation is key to a family business’ lasting legacy and not involving them in plans to pass on the business risks disengagement. It is crucial to have a written and documented plan for the continuity of the business to improve transparency and trust. The next generation needs time to build a collective sense of purpose and be supported in developing their framework for success.
“Our conversations with family businesses show that they often recognise the need to start the process, but those conversations can be difficult. Timing is crucial just as communication to all stakeholders.”
The survey also contains insights into how the pace of technology change and generational differences shape family businesses’ approach to legacy and succession planning.
Its other key findings are: that Nigerian family businesses have a slightly lower level of perceived concern about the threat from digital disruption (23 per cent) or cyber security vulnerability (33 per cent) compared with global average of 30 per cent and 40 per cent respectively; that 70 per cent of respondents say they plan to pass management to the next generation but only 10 per cent have a robust, documented and communicated succession plan in place and that women average 30 per cent of board members in Nigerian family businesses.
Regionally, the study says businesses in the Middle East and Africa are the most optimistic, with 28 per cent expecting aggressive growth. They are followed by those in Asia Pacific (24 per cent), Eastern Europe (17 per cent), North America (16 per cent), Central/South America (12 per cent) and Western Europe (11 per cent).