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Competition heats up for non-family business talent

Europe’s family businesses are competing to attract and retain top executives from outside the family, a new study reveals.

Europe’s family businesses are competing to attract and retain top executives from outside the family, a new study reveals.

More than four in 10 (43%) of family business representatives surveyed for the new European Family Businesses (EFB) and KPMG Enterprise European Family Business Barometer 2017 named the recruitment of skilled staff as one of their business’s major issues. This was the priority ahead of increasing competition (37%) and declining profitability (36%) in second and third place. The proportion that cited the recruitment of talent as a key concern increased from 37% last year and 33% in 2015.

With almost eight in 10 (78%) family businesses across the continent employing external directors, representing a steady incline since the barometer first asked the question in 2015, the issue of attracting skills was increasingly pertinent from the bottom to the very top of family businesses, survey organisers said.

The barometer echoed the human capital findings of the latest Global Family Office Report 2017. The report charted a year-on-year rise in the base salary of global C-suite personnel. European salaries were the second highest in the world, after North American.

The benchmark report found salaries had risen 6.8% to 10.1% in the space of only one year for family chief executives, chief investment officers, chief operations officers and chief financial officers. The rise was driven by "investment gains and greater competition among family offices for talent".

Ken McCracken (pictured), KPMG’s UK head of family business consulting, said the culture and values which become apparent to employees within many family businesses, once they have joined, meant they tended to perform strongly when it comes to retaining talent.

“However, as their appetite to tap into the skills that exist outside of the family gene pool grows, in a high employment economy, their experience of the war for talent intensifies as they compete to attract staff with sought after skills,” McCracken said.

“Given the vast majority (87%) of the families behind the businesses are committed to maintaining family ownership, and have a potentially wide pool of relatives amongst whom to share dividends, the remuneration packages on offer to attract talent can be more limited than businesses with other ownership forms. Share schemes and option plans tend to be off the table. So, it’s important that they effectively build and communicate their value proposition as an employer: What it means to be a family business and why it’s a good thing to work for one. This might include their commitment to staff and communities, and be demonstrated by tangibles such as higher levels of investment in training and corporate responsibility as well as relatively fewer redundancies during tougher times.”

McCracken warned the retention of talented non-family executives was “a critical business issue”, as without the right skills in a business it would struggle to deliver on its potential and to grow in a competitive market.

“With 41% of family businesses growing their headcount in the last year and 37% identifying increased competition in the markets for their goods or services as a significant commercial issue, families in business cannot afford to lose out on skills,” he said.

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