This is the second time we’ve run a survey looking exclusively at the next generation of family business leaders. Our first one in 2014 looked at the challenges they face in terms of gaps, specifically: a credibility gap, a communications gap, or a good old-fashioned generation gap. This time round, the focus is on expectations – the expectations they have of themselves, their business, and the wider world, and the expectations the current generation have of their successors.
So what does this Next Gen Survey add to that mix? Let’s look at the four ‘S’s: skills, scale, succession and stakeholders.
The first is skills. How do the current generation ensure their next gens get the right skills and experience? We firmly believe that next gens work somewhere else first, but what’s new in this survey is the number of next gens who are starting with a short stint at the family firm, following that with a longer spell at another business, and then finally returning to the family firm in a more senior role. Those first few months – often straight from university or as an internship – give the next gens a priceless insight into the reality of working ‘for the family’, and help both them and their parents decide what skills they will need and how best to gain them.
The second is scale, in its widest sense – from growing the business internationally, to developing new products and services, to expanding into completely different sectors, perhaps as a parallel venture. The next gens we spoke to have huge ambitions, and the energy to implement them. The challenge for them – and for their parents – is to forge a new future while respecting the past. In other words, protecting what previous generations have built, while making the changes the 21st-century business landscape will demand. In many cases this is about preserving the firm’s values and ethos, because these are what give the firm its heart and identity, rather than a particular product range or even a brand. The family firm – more than any other – is about the how even more than the what.
The third ‘S’ is succession. This is a theme that’s as old as the concept of a family business, and is only getting more challenging as the pace of global change accelerates. As a firm, we’ve spent a lot of time on this – both with clients, helping them manage that transition, and in our Family Business Surveys, discussing how best to approach it, the pitfalls to avoid, and the advantages of long-term planning. The most important thing we’ve learned is that succession is a process and not an event: it needs to be prepared for carefully beforehand, and managed sensitively afterwards. Existing leaders will often want to continue their involvement in some way, and we’ve found that most next gens value their input. The key is to find a way to transition the business which gives parents the chance to contribute (but not control), and the new generation the freedom to succeed.
And finally, this year’s survey highlights the need for next gens to see their wider family as ‘stakeholders’, especially in long-established businesses with a lot of family members involved. This year’s PwC’s Annual Global CEO Survey looked in depth at external stakeholder expectations, and how all businesses – public and private – are addressing those expectations, and factoring them into their corporate strategies and everyday decision-making. CEOs of family firms face all those same issues, but they also have a crucial extra dimension to manage, which is the wider family. The fact that many more next gens are worried about the potential for family conflict this year, compared to 2014, proves what a hot-button issue this is. This is an area where the current generation’s experience and understanding of relationships could be vital – in fact the support they can give here could well be the single most important ‘S’ of all.
Read the full report here.
Henrik leads the Middle Market business for PwC globally, focusing on owner-led, private, family controlled and entrepreneurial companies. He’s particularly focused on family and owner led businesses, advising them on how to address strategic issues relating to the owner's agenda.