Investing in Trust: The Key to Competitive Advantage for Polish Family Businesses

Investing in Trust: The Key to Competitive Advantage for Polish Family Businesses

June 23, 2023

Polish family businesses can build a sustainable competitive advantage in the digital transformation era and the growing importance of social responsibility. The answer may lie in investing in their operations’ most important and challenging aspect: trust.

This year’s theme is “A New Dimension of Trust,” which is not a random choice. The authors put forward a compelling thesis that building a lasting, long-term competitive advantage is impossible without investing in trust from all stakeholders. They emphasize that family businesses must actively engage in three key areas to invest in trust:

  • Digital transformation,
  • ESG (Environmental, Social, and Governance) responsibility,
  • Building trust and employee engagement, delegating responsibility for results to them.

The research covers both domestic and international companies. In Poland, family businesses account for 20% of GDP and vary in size from small firms employing up to 10 people to large multinational enterprises.

While I agree with the thesis presented by the authors, I do not share the conclusions they draw from the research. PwC seems too cautious in choosing their words, not wanting to offend potential clients. As a result, their conclusions sound somewhat timid and ambiguous, putting political correctness at the forefront.

I maintain the thesis that Polish family businesses have a tremendous amount of work ahead of them in terms of investing in trust and that they are not sufficiently prepared to achieve sustainable competitive advantage.

Let’s start with some optimistic data: 88% of family businesses experienced sales growth last year, with 68% achieving double-digit growth. Furthermore, 88% of companies foresee further growth in the next two years, with 20% expecting rapid growth. These numbers provide evidence of real success and promising prospects for the future, especially considering the challenges these businesses had to face: high inflation, the consequences of COVID-19, aggression from Russia, and low predictability of forecasts.

Are Polish family businesses ready to build a long-term competitive advantage? Is it time to analyze the research findings and answer the question: Are Polish family businesses ready to build a long-term competitive advantage? Let’s start with the first and most important area of trust investment: digital transformation.

Here, a surprise arises – the authors paid little attention to this crucial factor, analyzing it only its impact on company management. Meanwhile, digital transformation is key to improving the productivity of technological processes, work efficiency, cost optimization, and creating added value for customers. Companies focused on data analysis are well on building competitive advantages, but unfortunately, these aspects were not considered in their research.

Family businesses demonstrate a high level of trust in their management methods. As many as 75% believe they have well-defined management structures, 70% are convinced that task division and competencies are appropriate, and 65% have access to information and data necessary for decision-making. It seems like an impressive result, doesn’t it?

However, the uncertain times we currently operate in require high mobility, organizational agility, quick decision-making, and delegating responsibility for outcomes lower in the hierarchy. As much as 45% of the respondents cannot react quickly to market changes, while 55% are able to do so, which is certainly good news but should also serve as a warning signal. If we add the fact that only 35% of companies have solid digital skills, this signal becomes a loud alarm bell. Fortunately, 48% of companies consider the development of digital competencies as one of their priorities for the next two years. Why over half of the firms consider this competence less important is puzzling. It is worth requesting further research from PwC in this area.

Investing in Trust

Let’s move on to the second area of trust investment: ESG and sustainable development. The report’s authors write: “Surprisingly, we observed an increase in the average maturity of ESG actions among family businesses, despite their relatively small scale of activity compared to corporations.” The scale of activities is indeed relatively small because, as the report reveals, “only 8% of family businesses are undertaking ESG actions in a strategic and comprehensive manner, focusing on all areas defined by ESG (Environmental, Social, and Governance).”

I dare say that this result is rather pitiful. The global trend towards sustainable development and ESG investment is one of the key directions that determine not only market success but also the reputation of businesses. It is worth noting that in this respect, smaller companies often have an advantage over large corporations, which have been burdened with the legacy of the past and bureaucratic organizational structures. They can adapt to changes faster, be more flexible, and make quicker decisions.

Another important aspect is the building of trust and employee engagement. This area, as emphasized by the report’s authors, plays a key role in the success of family businesses. Trust among family members, based on shared values and traditions, is often the foundation of the entire business. However, as the company grows and new employees are hired, the challenge becomes how to maintain this trust and transfer it to new team members.

The report states that family businesses are doing well in this area, with 75% of companies declaring high trust and employee engagement. However, only 45% of companies have mechanisms to measure and improve trust levels. This indicates that there is still work to be done to actively manage and nurture trust within family businesses.

In conclusion, while Polish family businesses have achieved significant success and growth, there are areas where they need to invest more in order to build lasting competitive advantage. This includes embracing digital transformation, prioritizing ESG and sustainable development, and actively managing trust and employee engagement. By focusing on these areas, family businesses can strengthen their position in the market and ensure long-term success.