Family businesses a ‘good news story’ in the Canadian economy

85 per cent of Canadian family businesses projecting growth over next five years, according to PwC survey.

TORONTO—Family-owned and operated businesses are a “good news story” in the Canadian economy but face challenges attracting and retaining talent, according to a new report.

The 2014 PwC Global Family Business Survey found that family businesses in Canada are growing.

About 67 per cent of respondents achieved top line growth in the last year, and an even larger portion—85 per cent, according to PwC—are projecting growth over the next five years.

The firm said strength and confidence in family business in Canada “is likely a result of expected continued economic recovery, as well as the ability private family companies have to remain agile amidst economic uncertainty.”

“Family businesses are making the most of the economic recovery and are pushing forward in their plans for growth,” Saul Plener, national private company services leader with PwC Canada, said in a statement.

“While they remain cautious about investing in international markets, they continue to have a strong sense of confidence and optimism towards the road ahead.”

However confident family businesses are, they continue to face challenges when it comes to attracting and retaining talent, according to the survey.

Some 71 per cent of business surveyed cited the talent gap as their top concern over the next five years.

“Family-owned companies tend to require sophisticated leadership and a diversity of skill sets, but aren’t always able to provide market-competitive compensation,” the firm said. “These challenges highlight a need for family businesses to professionalize.”

Despite the need, the PwC survey found it is on the radar for only 21 per cent of Canadian respondents over the next five years.

“Furthermore, there is a significant demographic shift occurring in Canada—baby boomers are retiring, creating a skills gap in the workforce and putting a squeeze on family businesses,” PwC said.

“This is particularly challenging for the 27 per cent of respondents looking to sell or float their companies—the aging workforce will create a highly competitive buyer’s market between 2018 and 2025, meaning that succession planning will be particularly crucial for those seeking to exit.”

Despite this, the firm said family businesses bring “considerable benefit” Canada’s workforce and economy that extends beyond compensation and demographics.

“For example, 80 per cent of Canadian respondents state that they measure success beyond just profitability, and that they are committed to retaining staff even in bad times,” PwC said. “They agree their culture and values are stronger (75 per cent), they are more entrepreneurial (71 per cent), make decisions faster (73 per cent) and take a longer term approach to setting strategy (65 per cent) than non-family businesses.”

“Family businesses add a dynamic, robust and often complex layer to the general business community, and their operational models often reflect the agility needed to survive in today’s environment,” said Sharon Duguid, director of PwC’s Center for Entrepreneurs and Family Enterprise.

“Their sense of responsibility and community spirit lends itself well to a harsh and competitive market, and if they can invest in capacity and capability, bringing in the right people with the right skills, they’ll continue to be a key pillar of the Canadian economy.”

How CEOs Can Transform HR into a Revenue Driver

 

As I visit with big companies and organizations all over the world, it’s clear that most CEOs realize they need to make some dramatic changes in how they recruit people, align and manage performance, make compensation decisions, and optimize talent.

What’s not so clear to them is how they make that happen. While HR leaders and their teams are supposed to bring alive the cliché that “people are our most valuable asset,” many CEOs are not yet leading the way in giving those HR leaders the tools, authority, and organizational opportunity they need to unlock the value of the organizations’ talent pools.

Paradoxically, that lack of support from top executives is occurring even as 60 percent of CEOs surveyed by PwC say they’re concerned about not having enough talent, and/or the right mix of talent. As a result, those CEOs say, that talent gap is presenting them with some significant challenges:

• 31 percent said they couldn’t innovate effectively;
• 29 percent couldn’t pursue attractive market opportunities; and
• 24 percent had to cancel or delay a strategic initiative.

In many companies, a lack of CEO-level support for the HR organization and its mission keeps the HR team walled off from the ultimate sources of value in a company—revenue generation and customer engagement. This prevents HR executives from joining the rest of the company in using modern technology to gain new insights, make data-driven decisions, and engage with employees and customers more intimately and productively.

And that tricky situation will surely be compounded over the next few years as rapidly shifting demographics lead to a surge in millenials among your workforce: while millenials will comprise 36 percent of the workforce in 2014, they’ll make up almost half of it—46 percent—by 2020, according to a study conducted by the business school at the University of North Carolina.

The impact these young digital natives will have on your company isn’t limited to their sheer numbers. In fact, the biggest influence they’ll have is their demand—not their request, mind you, but their requirement—that the technology they use at work provides them with the same degree of social immersion, accessibility, and collaboration as the technology they use in their personal lives.

So the simple truth is that unless your company is offering these sorts of tools—indeed, these sorts of “workstyles”—then you’ll be sending a clear signal to recruits and new employees that you’re really not interested in hiring or keeping them.

For those companies that are willing to embrace the new social and mobile imperatives, you’ll find that modern HCM systems will improve employee engagement, productivity, and collaboration across the organization. By having social and mobile capabilities embedded in the key context of HR processes—from social sourcing, performance, and learning goal-setting and career management—these millennial-friendly companies will create engaging, two-way environments that don’t just allow but help people connect with each other and build mutually beneficial work relationships.

These are significant changes, and they require full support from the very top of the company. CEOs have to take ownership of this issue to ensure the ongoing viability of their companies. Otherwise:

• If your HR team lacks the tools to exploit social technologies to find excellent new recruits, how can your company find and hire the best people?
• If your HR team lacks the tools to identify high-potential stars within your organization and help create new high-impact opportunities for them, how will you retain top talent?
• If your HR team lacks the tools to tie compensation decisions to business strategy and real-world results, how will you be able to keep up in today’s ultracompetitive marketplace?

Let me offer a before-and-after example.

Let’s say Company XYZ has 100,000 employees, with annual compensation and benefits costing about $10 billion. At the annual budget meeting, everyone turns to the head of HR as the CEO asks, “What’s our plan for raises for next year?”

The HR leader squirms and looks a bit uncomfortable and says, “Our consultant says we should give 4 percent raises across the board.”

The CEO asks, “Why 4 percent?”

“Uh, well, because that’s what the consultant recommended, and we’ve used this consultant for the past five years.”

“I get that,” says the CEO, “but why 4 percent?”

And the head of HR swallows hard and says, “Because the consultant thinks 5 percent is too high and 3 percent is too low.”

Believe me, even if that conversation seems a bit silly, it’s pretty darn close to what’s happening within a lot of companies. And what they need to understand is that the HR leader doesn’t want to give such a vague answer—rather, the HR leader simply lacks the business insights and data-driven analysis to offer a more precise and relevant response.

Remember, in most big companies, compensation and benefits are the single biggest expense in the entire cost structure—by far! For company XYZ, we said its compensation costs are about $10 billion—so the 4 percent raise would equate to a new cost to the company of $400 million. That’s a significant cost to the business. Yet, the HR leader doesn’t have the modern technology necessary to make an insightful and business-driven decision on whether or not that level of spend is correct or will have the desired outcome on the business!

In the “after” scenario, an HR leader equipped with a modern HCM system could have answered that question about raises very differently by saying, “Let’s step back one second and look at the overall situation that will eventually include what type of raise pool we want for next year.

“Our attrition rate for the past 18 months has been 10 percent, which means we had to replace 10,000 people this year. But because of our rapid growth, we also had to hire an additional 4,000 people to handle that growth and sustain our momentum. So this year, we had to add 14,000 new people.

“And I’m pleased to be able to tell you that with our new recruitment and onboarding system, we were able to bring on 14,000 terrific new people—more on that in a moment—and with our new talent management system, we were able to create more than 1,500 growth opportunities for our brightest people. All in one year.

“On top of that, our performance management system tells us that those 14,000 new employees are not only costing us less than average—they come in at a cumulative 93 percent of midpoint—but more than two-thirds of them are performing in the top 20 percent quintile. We’re bringing in better performers while spending less money—and because of that, I’d like to recommend that we completely rethink our old concepts of ‘annual raises’ and use our data-driven analytics to find a better way.”

Hey, it sounds great—but that type of insight simply will not come to pass if HR leaders are left behind with an old, brittle, and incompatible hodgepodge of inflexible systems that make it impossible for the HR to deliver quantitative insights, forward-looking analyses, and revenue-driving decisions.

Those insights are absolutely essential for companies to be able to unleash the full potential of their people and begin to deliver employee experiences that parallel the terrific new customer experiences that today’s business environment demands: socially driven, optimized for mobile, and seamlessly consistent across smartphones, tablets, and PCs.

As an example of great business leadership and HCM strategy, let me mention what our friends at British Telecom (BT) are doing. One of the world leaders in communications services and solutions, BT has just decided to install a full suite of Oracle HCM Cloud applications to support the company’s growth agenda and help deliver its business strategy to more than 87,000 employees in 170 countries.

BT believes that its new HCM applications – with everything from recruiting and talent management to workforce-deployment optimization – will help the company increase productivity, accelerate business performance, and empower its people to innovate, grow, and delight customers.

Yes, those are lofty ambitions, but they’re also essential in today’s consumer-driven global marketplace where social-mobile lifestyles are disrupting not only how people shop and consume, but also their decisions about where they’ll work and why they’ll work there.

So it’s up to the CEO to drive HR transformation and help HR leaders become business-centric and data-driven enablers of revenue, innovation, and superb employee experiences.Posted by:Mark V. Hurd

How To Set Prices To Seriously Increase Profit

 

Not many companies would characterize themselves as having an obsession with pricing, and yet pricing represents one of the most attractive and most overlooked opportunities out there to increase profit.

There have been a number of studies over the years that have highlighted the importance of pricing as a key lever in driving profit increase. Large consulting firms such as A.T. Kearney, Boston Consulting, and PwC have published a vast array of data that have indicated pricing as the fastest and the most efficient way to improve your bottom line. Perhaps the most often quoted example, the McKinsey study, found that a 1 per cent price increase, if the demand remained constant, would result in an average of an 11 per cent increase in profits.

The graph below shows that pricing has more leverage than reducing costs or growing sales volume. It is also an area that relatively few companies focus on. Mastering how to set prices can give your company a competitive advantage.

Source: Ken Wong- Queen’s School of Business

Where Are We Today?

Buyers have become far more knowledgeable about how to extract pricing concessions from sellers; they understand multi-tiered discounts, a myriad of promotion programs ranging from lump sum commitments to per unit discounts, and the concept of using information as leverage.

Attitudinally, most companies struggle with the idea of a price increase based on volume risk. 

Even maintaining current pricing is a challenge in our hyper-competitive realm of bricks and mortar big box retailers, off-shore competition, and cyberspace-based virtual stores.

Organizationally, the responsibility for pricing can be varied as it is linked to many aspects of the business. This can cause a nightmare scenario in some companies, with one group responsible for setting invoice prices, another team handling allowances and perhaps even a third group managing rebates/ performance based discounts. Lots of numbers, lots of data, little unified focus and/or direction.

How To Set Prices

I wish it were as simple as applying a 1 per cent increase across the board and reaping the 11 per cent gain at the bottom line. As I’m writing this, I’m thinking of the number of times this has been included in the business plan, always with the good intention of coming back and scouring pricing to deliver the bottom line. In my experience, this seldom happens.

Pricing is a large and complex issue for many companies, but there is profit upside to taking a focused approach. I generally think of a four stage process for how to set prices, directed against a key product, category or group.

• Stage One

  revolves around data collection, both internally and (often) externally. This stage is meant to not only identify margins at the transaction level, taking into consideration the current pricing structure, but also to gather insights by the channel of distribution and competitive research.

• Stage Two

  is analytical in nature and is designed to turn big data into knowledge. This stage addresses the concept of leverage. It asks, are there potential pricing opportunities based on a particular brand’s equity? Or is there value in redefining a particular channel?

• Stage Three

  brings together the learning in a way that allows strategy development. You can click here for a free download of the most commonly used pricing strategies to help you with this stage.

• Stage Four

  has a focus on pricing policy, executional guidelines and timeline for implementation.

Control is a theme of the process, both in terms of input and output. Since responsibility for pricing actions, as well as the resultant data, can rest with a number of managers across the company, having some form of centralized leadership and control will be critical to success. Similarly, establishing policy and monitoring execution will also be added to ensure a controlled implementation.

It’s true that pricing represents the fastest way to grow the bottom line. It provides more leverage than reducing costs or growing sales volume does. You’ll need to apply analytical rigor and strategic objectivity to this complex area, but the rewards of a pricing focus will emerge quite quickly.

About John Slauenwhite

John Slauenwhite is a sales-oriented marketer who balances strategy and action. His background includes large corporate environments, senior roles in international trade development, and global leadership in the B2B arena across multiple channels, plants, and product lines.