REGIONAL PERSPECTIVES PwC Romania
Family firms – a resilient
model for the 21st century
In a very difficult market environment,
Romanian family businesses have
performed well in the past year, with
71% of respondents indicating an
increase in sales. Moreover, family
business owners and managers are
reasonably bullish about growth
perspectives in the next five years, with
61% indicating that they expect their
companies to grow steadily, while 13%
aim at an aggressive growth, including
through mergers and acquisitions.
Around one quarter of Romanian
family businesses are rather cautious
about the future and plan to
consolidate their structure at the
current turnover level.
The Results of the PwC Family Business
Survey Romania 2013 are well aligned
with those at the global level, where
69% of respondents aim for steady,
organic growth, while 12% pursue more
aggressive growth strategies.
CHALLENGES AHEAD
When it comes to challenges for their
organization, most family business
owners and managers focus on external
factors, such as the market conditions
(52%) or increasing competition (32%).
42% of the respondents are concerned
about the tax regime and 29% about
regulation and government policy. On a
Key external issues - PwC,
Family Business Survey Romania 2013
52%
Market conditions
more positive note, concerns connected
to the availability of finance, a pressing
issue in the wake of the global financial
crisis, seem to have subdued, with only
13% of respondents quoting this as a
challenge for their organization. Also,
there seems to be confidence in the
capacity of the Romanian National
Bank to control exchange rate volatility,
with only 16% of respondents voicing
concerns over this issue, as well as
about the interest rates levels.
With still weak connections to external
markets and a smaller proportion of
exports in overall turnover, Romanian
family businesses seem less concerned
about the European economic crisis,
with only 13% of respondents indicating
this as a threat.
In terms of internal challenges within
their businesses, respondents are
preoccupied about staff recruitment
and retaining (39%), with most family
business owners and managers fearing
that they are being put to an unfair
disadvantage with multinational firms
over attracting the best employees, due
to differences in remuneration and
career track perspectives.
32% of respondents plan to focus on
reorganizing their companies in the
years to come, while 26% worry about
Key Internal Challenges – PwC,
Family Business Survey Romania 2013
HOW FAMILY BUSINESSES
DIFFER
39%
Staff recruitment
32%
Company re-organisation
32%
Competition
29%
Govt policy/regulation
Exchange rates
16%
Interest rates
16%
13%
Availability of finance
13%
42 Romanian Business Digest March 2013
26%
Capacity/meeting orders
19%
Cash flow/cost control
Availability of finance
Exports / problems in
foreign markets
Over the next five years, Romanian
family firms express concern about the
general economic situation, with 81%
identifying this as the single most
pressing issue. Entrepreneurs seem
aware that they need to continue to
innovate (55%) in order to maintain
their competitiveness. Also, they see
that increased competition is putting
pressure on fees and prices (55%), while
attracting and retaining key talents will
remain a prime concern (48% and 45%
respectively).
On the other hand, little attention is
being given to important factors such as
devising a sound succession plan.
Around one third of the respondents
identified this as a key challenge over
the medium run, with no owner or
manager indicating that they see
potential family conflicts as a challenge
over the next five years, which seems an
underestimated risk at best, if not even
wishful thinking.
42%
Fiscal/tax regime
production capacity and capability to
meet the orders of their customers. The
pressing issue of cash-flow
management and cost control seems to
have been mitigated to a large extent,
with only 19% of respondents quoting
cost-cutting as a pressing challenge and
only 10% focusing on tax planning and
optimisation.
Tax planning/optimisation
16%
10%
Quicker and more flexible
decision-making
Given their rather flexible nature,
family businesses believe they are more
agile than multinational or public
companies. They adapt faster to change
and are quicker to identify and to
follow-up on opportunities.
Not to mention, investing personal
capital in a family business gives a
different weight to the decision-making
process.
Higher involvement and
responsibility
Both owners and employees are more
engaged in the activities and
preoccupied with the results, taking
direct responsibility for the business’
failures and successes. There is a
stronger commitment to employees, to
customers, and to the business itself.
This also reflects in the behaviour of
the employees, which are more loyal
and stay longer with the business.
Overall, there is a higher responsibility
towards suppliers and customers – a
responsibility that actually works both
ways. The family business is part of the
local community.
Simpler management structures
and less bureaucracy
Relationships are more personal as
there is a shorter chain of management
and information flow more directly.
The dynamic is based on the family, on
the business and on the ownership,
which brings about a strong ethic of
social control, justifying the family
business’ preference for unwritten rules
over formalization.
An entrepreneurial spirit doubled
by creativity
The family business needs to constantly
reinvent itself just to keep up with the
market. It is always trying to find the
best solutions and related strategies for
coping with change.
This seems to be the winning recipe.
Even in a context of economic
uncertainty, family business
world-wide appear to be thriving (65%
have grown sales in the last year,
particularly in Eastern Europe, Latin
America and the Middle East).
FAMILY BUSINESSES AND THE
ROLE OF SOCIETY AND
GOVERNMENT
Family firms’ managers and owners see
their companies as having a distinct
identity on the market with unique and
strong values. Therefore, 84% of the
respondents state that
they do all they can in
order to retain staff,
while 77% declare that
they feel a sense of
responsibility to
support employment in
areas in which they
operate. Also, they show
a sense of responsibility
to support local
community initiatives,
thus contributing to the
general development of
the region in which
they are based.
While private
companies’ owners and
managers see
themselves as a source
of stability and job
creation in the national economy, they
feel frustrated that their role is not
recognized and appreciated enough by
public authorities. This feeling is shared
by most entrepreneurs around the
world, but in Romania this perception
is particularly strong, with 81% of
respondents declaring that the
Government does not recognize the
importance of family businesses, with
only Greek entrepreneurs having a
more acute sense of estrangement.
Romanian entrepreneurs feel also that
the Government doesn’t do what it can
to help businesses survive and develop.
Middle East
Malta
Switzerland
Singapore
Mexico
Turkey
Canada
Austria
India
China/HK
Sweden
Germany
Belgium
Taiwan
Brazil
South Korea
Ireland
Denmark
Australia
Finland
USA
Italy
South Africa
UK
Russia
France
Romania -68%
Greece -70%
FAMILY BUSINESS AND
SOCIETY AND GOVERNMENT
Confronted with a difficult lending
environment, as banks are keeping their
purses tight, while private companies
are reluctant to go public,
entrepreneurs feel that the state should
play a more active role in facilitating
access to financing.
Moreover, local entrepreneurs feel the
inadequacy of the Romanian education
system as they complain about the poor
quality of fresh graduates. 58% of
-7%
-13%
-14%
-18%
-19%
-21%
-22%
-26%
-26%
-31%
-40%
-42%
-42%
-43%
-48%
34%
31%
25%
24%
22%
21%
16%
10%
8%
4%
3%
NET agreement
‡ Net agreement is the difference between positive and negative answers.
March 2013 Romanian Business Digest 43
REGIONAL PERSPECTIVES PwC Romania
family firms’ managers and owners
stated that young people don’t have the
right skills in order add value to their
employers.
Family firms managers and owners
would like to see the Government take
some initiatives to relive the tax burden
by applying exemptions for profit tax in
case of reinvested profits and make
such measures actually working in
practice. They would also like a
legislative simplification and a
reduction in bureaucracy and red-tape.
Another request would be for the
Government to offer support in
accessing new markets, by offering
state-guarantees, but also support in
business development, networking and
marketing activities. They would like
state loans for acquiring new
technologies that would allow them to
boost productivity and increase
competitiveness.
CONCLUSIONS
Romanian family businesses know they
play an important role in the economy,
but don’t think the government
recognises it at the real value.
They want the government to level the
playing field by making it easier to
access finance and by removing the tax
on reinvested profit or to assess other
tax incentives.
They identify the need to innovate as a
key challenge in the years ahead and as
another area where the government or
other bodies could potentially help and
support them.
Romanian family businesses seem to
consider the procedures addressing
family conflict although, somewhat
surprisingly, none of them thinks
family conflict will be a challenge over
the next five years. Furthermore, one
aspect that family businesses will have
to address in the coming period
(although some of them have started to
do so) is related to the succession
planning for the transfer to the new
generations of owners.
makers in family businesses across 28
countries worldwide in Q3 2012. The
interviews were conducted in the local
language by native speakers and tended
to average between 20 and 35 minutes.
The results were then analysed by
Jigsaw Research. 31 interviews were
conducted in Romania.
SURVEY METHODOLOGY
1,952 semi-structured telephone
interviews were conducted via Kudos
Research in London with key decision
Go to doingbusiness.ro for more reports
and studies.
PwC Romania
Strada Barbu Vacarescu nr. 301-311, Lakeview Office, 020276, Bucuresti
Phone: +40 21 225 3000; Fax: +40 21 225 3600
offi[email protected]
www.pwc.com/ro
44 Romanian Business Digest March 2013