Port Moresby Chamber of Commerce and Industry Inc. (POMCCI) recently hosted the Price Waterhouse Coopers (PwC) PNG 3rd Family Business Survey (FBS), presented by Michael Collins Entrepreneurial and Private Business (EPB).
The survey shed light on the dynamics of family businesses, their challenges, and strategies for building trust and sustainability. It was presented on April 18th at Lamana Hotel in Port Moresby, attracting attendees from various companies, businesses, and stakeholders.
Survey Insights
The survey gathered insights from 2,043 respondents across 82 territories, including 630 participants from the Asia Pacific region and 42 family businesses from Papua New Guinea, marking a 24% increase from the previous survey in 2020.
Notably, 72% of respondents globally, 81% in Asia Pacific, and 88% in PNG were either first or second-generation businesses.
Key findings revealed a mixed performance in the last financial year, with some businesses experiencing double-digit growth in sales while others faced declines.
However, the poll showed optimism about future growth, with strategic priorities focusing on expansion, digital capabilities improvement, and customer loyalty enhancement. Long-term priorities emphasize the importance of family legacy and value generation.
Key findings
- Increase sales: Global 61%, Asia Pacific 66% and PNG 69%
- Double digit growth: Global 43%, Asia Pacific 41%, PNG 40%
- Decline in sales in the last financial year: Global 8%, Asia Pacific 12%, PNG 19%
- Growth expectation over the next two years: Global 77%, Asia Pacific 75%, PNG 67%
- Expected to restructure or downsize over the next two years: Global 3%, Asia Pacific 3%, PNG 12%
Based on the FBS, the strategic priorities over the next two years are as shown:
- Expansion: Global 51%, Asia Pacific 55%, PNG 38%
- Improving digital capabilities: Global 44%, Asia Pacific 43%, PNG 38%
- Protecting the core business: Global 44%, Asia Pacific 53%, PNG 52%
- Increasing customer loyalty: Global 42%, Asia Pacific 40%, PNG 50%
- Adapt the business model: Global 34%, Asia Pacific 37%, PNG 45%
- Prioritize employee trust: Global 32%, Asia Pacific 30%, PNG 17%
- Looking to innovate: Global 27%, Asia Pacific 28%, PNG 7%
- Prioritizing reducing carbon footprint: Global 20%, Asia Pacific 12%, PNG 2%
Longer term priorities
Respondents showed some greater consistency in prioritizing the generation of long term value for the family and delivering value to customers.
- Maximizing short-term profits: Global 10%, Asia Pacific 14%, PNG 24%
- Importance that business stays in the family: Global 12%, Asia Pacific 17%, PNG 26%
Other key findings on family business:
- Trust between family members: Global 74%, Asia Pacific 71%, PNG 66%
- Family alignment about company direction: Global 59%, Asia Pacific 55%, PNG 50%
- Having clear governance structure: Global 65%, Asia Pacific 61%, PNG 57%
- Having clear set of family values: Global 70%, Asia Pacific 63%, PNG 57%
- Having documented business process: Global 45%, Asia Pacific 36%, PNG 24%
- Importance to ensure business stays in the family in the next five years: Global 66%, Asia Pacific 55%, PNG 57%
- Creating a family legacy over the next five years: Global 67, Asia Pacific 61%, Pacific 45%
Family businesses need to adopt new priorities to build trust and ensure sustainability.
Stakeholder relationships to consider
- Customers trust you to provide quality goods and services that meet their expected standards at a fair price.
- Suppliers trust you to pay them on time and meet other supply conditions.
- Employees trust you to treat them fairly and respectfully, compensate them fairly and transparently, provide a safe
- working environment and provide appropriate feedback and development opportunities.
- Governments and authorities trust you to comply with the laws and regulations.
- Shareholders expect you to meet high standards of corporate governance, be transparent, true and fair in your
- corporate reporting and for management not to act in their own self-interest.
Building Trust
Trust emerges as a crucial factor for sustainability, impacting relationships with customers, employees, and family members. Respondents highlighted the importance of trust across stakeholders, with varying degrees of confidence in their ability to build and maintain trust.
Key strategies include transparent reporting, communication of values, and active engagement with stakeholders.
Mr. Collins during his presentation emphasized the importance of building trust, as it is “vital in businesses as it is in personal relationships, and from a personal perspective, building trust requires demonstrating credibility and reliability.”
“For example, customers trust you to provide quality goods and services at a fair price, based on expected standards. While suppliers trust you to do payment on time and to meet other supplier’s demands. Your employees trust you to treat them fairly and respectfully and to compensate them fairly, provide safe working environment, and provide appropriate feedback and development opportunities.”
“Government and authorities trust you to comply with laws and regulations and shareholders expect you to meet high standard of corporate governance and be transparent, true and fair,” he added.
The new formula of trust, based on the survey is referring to the stakeholder groups, customer expectations and businesses toolkits.
- The Stakeholder groups have expanded to customers, employees, family plus public.
- Expectations have grown for excellent service and product, brand recognition and history, plus defined purpose, commitment to Environmental, Social, and Governance (ESG) and diversity, equity, and inclusion (DEI), transparent and effective communication.
- The toolkit has changed and is now referring to owners’ annual report letters, website plus social media, speaking out on social issues and, taking action on commitment.
The FBS for 2022 has shown about trust:
- Respondents considered having trust of a broad range of stakeholders was essential: Global 93%, Asia Pacific 90%, PNG 88%.
- Respondents considered that they don’t encounter any major challenges building trust with stakeholders: Global 37%, Asia Pacific 34%, PNG 36%.
Based on the survey, PNG family businesses are not taking the actions required to build trust:
- Do not have leaders that encourage a culture of accountability: Global 57%, Asia Pacific 63% PNG 76%
- Do not have a system in place to gather customer feedback on products and services: Global 66%, Asia Pacific 74% PNG 79%
- Do not actively protect and consistently communicate about how it uses customer and employee private data: Global 71% Asia Pacific 81% PNG 88%
- Do not effectively respond to and address data/ privacy breaches: Global 73%, Asia Pacific 82% PNG 93%
- Do not have a clear purpose statement and commitment that advances diversity, equity and inclusion: Global 79%, Asia Pacific 82% PNG 90%
- Do not take a public stance on important issues: Global 84%, Asia Pacific 89% PNG 86%
- Do not have a clear and committed ESG strategy: Global 85%, Asia Pacific 89% PNG 98%
Building trust with customers:
- Feel it is important to be trusted by customers: Global 82%, Asia Pacific 79%, PNG 71%
- Believe they are fully trusted by customers: Global 51%, Asia Pacific 44%, PNG 50%
Building trust with employees:
- Feel it is important to be trusted by employees: Global 68%, Asia Pacific 97%, PNG 62%
- Believe they are fully trusted by employees: Global 46%, Asia Pacific 41%, PNG 53%
Building trust with family members:
- Feel it is important to be trusted by family members: Global 63%, Asia Pacific 45%, PNG 67%
- Believe they are fully trusted by family members: Global 74%, Asia Pacific 71%, PNG 66%
Key Takeaways
According to the survey, to build trust with customers, businesses should focus on measuring and reporting non-financial targets, communicating values, and taking public stands on relevant issues. Similarly, fostering trust with employees involves clear communication of company purpose and values, delivering on non-financial goals, and providing development opportunities.
Building trust with family members necessitates clearly defining roles, establishing governance structures, and transparent reporting on non-financial goals. Strategies include drafting a "constitution" to align family goals and qualifications and implementing formal governance mechanisms.
Actionable Steps
Businesses can enhance trust by fostering a culture of accountability, gathering feedback from customers, and protecting private data. Embracing diversity, equity, and inclusion, taking public stances, and committing to Environmental, Social, and Governance (ESG) principles further strengthen trust and sustainability.
Client Engagement
The survey findings inform discussions with clients on various topics, including remuneration planning, succession planning, regulatory changes, and tax compliance. PwC PNG's initiatives, such as the NextGen Club and Owner's Agenda, provide platforms for continued support and collaboration within the family business community.
The 3rd PwC PNG Family Business Survey underscores the critical role of trust in driving sustainability and success. By adopting proactive strategies and aligning priorities, family businesses can navigate challenges, foster long-term relationships, and create enduring legacies.
Family businesses play a significant role in global economies, driving innovation, creating jobs, and fostering long-term relationships.
