The role of the next generation

"I’d be delighted if my sons and nephews wanted to join the business, but I’d want them to develop a career outside the company first. And if they do join, they’ll have to have the right skills. Family businesses go wrong when family members are given jobs they’re not suited to. They need to have something to offer in whatever position they may take. It’s tough enough being a family member.”

Daniele Simonazzi CEO, FLO S.p.A., Italy

In the next five years it is likely we will see the biggest inter-generational transfer of wealth the modern economy has ever seen. Much of this wealth will take the form of shares in family businesses, which is why a more robust approach to succession planning is such a key priority for the whole family business sector – and indeed for the economies they help sustain. A change of this magnitude poses huge risks, but it’s also opening up immense opportunities, with a new generation in waiting that’s more ambitious, more open-minded, and arguably better prepared than any of those that have preceded it.


“You need strong and visionary leadership, and you need to be looking ahead to each new generation to find it. We invest a lot of time in succession planning, and we have a four-year development plan for our next generation, and find opportunities for them to get work experience in our subsidiaries.”

Thomas Ahlström Managing Director, Antti Ahlström Perilliset Oy, Finland

Earlier this year, we undertook a detailed survey of this next generation of family business leaders, to find out what their priorities are, and how they see the future.  Some of the findings came as no surprise – the next generation are ambitious, dynamic, and open to change. They want the business they hand on to be very different from the one they inherit: they want to explore new products and services, and new markets, but they’re also interested in new locations, and even new business models. 88% said they want to do something special that will really make a mark, and 79% have lots of ideas about how to take the business forward. 59% would like to diversify their product portfolio, but 68% believe their firm is unlikely to make this change, even a decade ahead (which tallies with our Family Business Survey results). This may explain why 47% of the next gens are looking to set up a parallel venture, alongside what the main business is doing.

And they’re more likely than any previous generation to make a go of that: many of today’s next gens are from the millennial generation, which comes to the workplace with different expectations, different priorities, and an easy familiarity with digital technology, all of which will influence the future direction of the family business sector. Many have benefited from a business school education, which also gives them the analytical tools they need to carry out effective strategic and medium-term planning.

Indeed, we think the coming transitions could be some of the most interesting and significant that most established family firms will ever go through. The sort of person who’s going to be running a family firm in five to ten years’ time will look and think very differently from most of those doing it today.

“My great-grandfather always said ‘Tradition is not about worshiping ashes but keeping the fire burning’. Therefore, we must not rely on what worked in the past but be innovative.”

Aged 32 2nd- generation family business, Austria

Five ways the current generation can support the next one

Sian Steele, Family Business Leader, PwC UK.

There are five key things the current generation can do to make sure the next generation have the best chance to succeed:

 

1. Plan ahead

The single most important success factor for succession is a good plan. That starts with detailed career and development planning for the next gen, so they can get a wide range of experience and acquire the right skills. If possible, find ways for them to work outside your home market, as well as outside the family firm. This will help build their credibility if they do eventually decide to come back to the family business.

2. Make it an opportunity, not a burden

Many of the next gen are excited about the chance to work in the family firm and take it over one day. But make sure they don’t feel expectation as a burden, and have the chance to make a free choice about their own future.

3.  Give them the chance to build something of their own

54% of respondents this year talked about the possibility of setting up new entrepreneurial ventures to run alongside the main firm, and 47% of those questioned in our next gen Great Expectations survey said they would like to do this. Such ventures can be a wonderful way to give the next gen their own area of responsibility, where they can learn, explore new ideas, and gain vital skills. And who knows – those new ventures could evolve into the future for your firm.

4. Understand where and when to let go

Almost all next gens say they would welcome continued support from their parents when they take over (91% our next gen research), and many talk with feeling about the mentoring they’ve received, and the lessons they’ve learned. But there’s a fine balance between being there to help, and never letting go. It’s an understandable wrench to step back from a business you’ve run, and in many cases, built – 61% of next gens in Great Expectations acknowledge this as a challenge in their own family. So spend time discussing the exact shape of your future role, and find yourself something else to do beyond the business, so you won’t constantly be tempted to ‘just show up’.

5.  Address family governance

One positive role the current gen can play is in relation to family governance. We all know how dangerous conflicts and misunderstandings can be in family firms, and 52% of next gens in our Great Expectations survey said that they were worried about the prospect of dealing with ‘family politics’. The older generation are ideally placed to help manage this, both through their experience and the ‘gravitas’ of age.  So if your family firm hasn’t yet got to grips with family governance, or could benefit from a proper family constitution or family council, why don’t you take on this task yourself, so the next gen can concentrate on taking on the business.

 

We’ve been working with family firms for decades – in fact many of the current generation of family business leaders were next gen when we first advised them. We can bring all that experience to bear to help family firms manage both the personal and professional challenges they face. And, we have specific services and support for next gens, from training and mentoring, to our Global Next Gen Club, where they can learn from others in the same situation, develop new skills, and build their own business networks.

 

To find out more about PwC’s Global Next Generation Club, visit NextGen Club

Explore the data

Use our data modeler to look at the findings from our Survey in greater depth. 

Explore five themes: Business performance & challenges; global considerations; The family business DNA & succession planning; digital; the people piece. 

Filter the data by territory, industry, generation or turnover.

Compare the data


Case studies

Better by design: Innovation and new product development in Denmark

Vipp is known the world over for its elegant, practical homewares, which are the essence of Scandinavian style, but it’s a success story built on – of all things – a bin. Holger Nielsen was a metal worker by trade, and produced a special pedal bin for his wife Marie’s hair salon, as a side-line to his main business processing steel. When Holger died, his daughter Jette Egelund took over the company, specifically to explore the commercial potential of the bin design. As she says herself, “I thought if I make a failure of it, it’s my own risk.”

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Stephanie Hyde
Global Entrepreneurial & Private Business Leader
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