Great Expectations: The next generation of family business leaders
of next gen family business leaders want to leave their stamp and do something special with the business
of next gens worked outside the family firm to gain useful experience and bridge the credibility gap before joining the family business
of next gen family business leaders are worried that they will need to spend time managing family politics
total turnover of companies represented by 268 respondents in 31 countries
Navigating the challenges facing family firms as they transition to the next generation
We’ve been running an international Family Business Survey for over a decade, and in 2014 we added our first-ever survey of leaders-in-waiting. We asked them about their personal ambitions, their plans for the future of their business, and the unique challenges of being the ‘boss’s child’. That survey identified three key ‘gaps’ that the next generation face: the generation gap between their experience and expectations, and those of their parents’; the credibility gap, which they have to surmount if they’re to establish themselves; and the communications gap, which can arise both within the firm, and within the family.
Two years on, what does the picture look like? It’s certainly changed, and broadly for the better. The next gens’ confidence has risen, their horizons have widened, and their preparation for senior roles has improved. But some of the issues are more challenging too, both inside the firm, and in the wider business landscape.
Much of this comes down to the central theme of ‘expectations’ – what the next gens expect of themselves and their business, and how they expect global trends to evolve, as well as the views of the current generation, which also need to be taken into account, especially in relation to the always sensitive issue of succession. Both the current and next generation have a significant responsibility to play their part in the succession journey. And unless there is a clear understanding about the respective expectations and how the next generation can prepare and equip themselves for their future role, the future success and sustainability of the business could be put at risk.
The theme of ‘expectations’ will be our focus in this report. As well as the survey findings, we have rich insights from in-depth interviews with next gens across the world, and input from our own expert practitioners, all designed to help the next gen realise their ambitions and make their ‘great expectations’ a reality.
Henrik Steinbrecher, Network Middle Market Leader and Stephanie Hyde, UK Executive Board and Global Next Generation Programme Partner.
worked outside the family firm to gain experience before joining the family business.
Confidence, skills, preparation: The next gens’ expectations of themselves
We spoke to over 250 next gens across the world, from those just starting as trainees in the family firm to those at board level with more than a decade of experience behind them. Just under half of the respondents had always planned to work for the family firm, and this figure hasn’t changed since the last survey. What has changed, however, is how they’re going about doing that.
In our 2014 survey we talked a lot about the value of working outside the family firm, both to gain useful experience and bridge the credibility gap. 70% of the next gens we spoke to this year have done this at some point before they joined the family firm. In many cases this is encouraged by their parents as part of a structured development plan - 43% of the respondents who worked for another company before joining the family business did so with this in mind.
of next gen family business leaders want to leave their stamp and do something special with the business.
Next gens’ expectations of their business
The next gens of 2016 are well prepared, confident, and ambitious – both for themselves and for their companies. They want to be more than just 'caretakers' of the family firm. The next gen care greatly about the business and want hand it over in good shape but many of them would also like that business to look very different. Not just bigger and stronger, but more international, more diversified, and more modern. The next gen are exploring new ideas, new markets, new locations, and even new business models.
believe their firm has a strategy fit for the digital world.
Digital: Springboard or stumbling block?
The world the family business is operating in has changed, and the next gen will need to understand these challenges, and have the skills and strategies to deal with them.
Digital is an area where the generation gap still lingers. Many next gens struggle to convince their parents that the firm needs to do more on digital: 29% believe that family firms are slower than other types of business to keep up with new technology, and 40% confessed to some degree of frustration in trying to get new ideas accepted by the current generation.
of current family business leaders and next gen identified a skilled workforce as the #1 business priority.
How do next gens' business priorities compare to current leaders?
This year’s PwC Global CEO Survey focused in particular on how public expectations of business are changing, and how this is having an impact on corporate decision-making. Stakeholder perceptions are especially important, and at the same time, the definition of ‘stakeholder’ is changing and widening, and will vary according to the type and sector of the business. It’s perhaps to be expected that next gens are very much aware of this agenda, and their priority stakeholder groups closely match those identified by respondents to this year’s CEO Survey.
of next gens think it will be difficult for the current generation to fully let go when they take over.
View from the bridge: The expectations of the current generation
Another extremely important set of expectations: those of the current generation. How do they see their evolving role? What about the succession process? And how can they help with that other crucial element of the professionalising agenda: professionalising the family?
Those taking over family firms have probably always worried about the succession process – about how their parents will adapt, and how they themselves will measure up. Many of these concerns have not changed a great deal since our last next gen survey in 2014. Next gens are still concerned about managing the succession process successfully, and about finding the best way to ensure that their parents still feel involved and able to contribute, but also make the transition they need to make to a more passive role.
Explore perspectives from the next generation of family business leaders. Find out what they think on key issues such as succession, professionalisation, the evolution of the business landscape and the digital question.
There’s a lot of good news in this year’s Next Gen Survey. Our respondents are more confident, more experienced, and have bigger ambitions. But many of the old challenges still remain. In our 2012 Family Business Survey we summed up the challenges facing family firms in terms of skills, succession, and scale, and these three factors are just as relevant for next gens four years later. And there’s also a new ‘S’ to add to the mix: stakeholders:
• The next gens need to develop their skills – both their technical and business know-how, and softer skills like teamwork and communications. Working outside the family firm is an ideal way to do this, and there’s a lot of value in taking additional training and development courses too. And when they do join the family firm they need to ensure that the role matches their capabilities, and they develop any additional skills they may need to equip them for a more senior role, and for becoming an owner as well as (or even instead of) a manager.
• The succession process will always be a sensitive one, and a robust plan and framework are vital. It’s reassuring to see that many more family firms are starting this process sooner, and managing it more effectively. The transition process needs to be planned as early as possible, and the next gen’s training and development plans aligned with it. There’s also no substitute for good communications, and this is the responsibility of both the current and the next generation; expert external facilitators can help here.
• Scale, that takes on new meanings in the context of the next generation: it’s the scale of the business, and its strategy for the future, but it’s also the scale of the next gens’ personal ambition. From the business perspective, this means looking at new products and services, new markets, and even new business models, and understanding how digital could disrupt what the firm does now, and open up new possibilities in the future. For the next gens’ personal perspective this is about ensuring that the firm is able to evolve and change, and if necessary re-invent itself, without losing touch with its values or the passion that founded it.
• As for stakeholders, this is about the changing expectations of the world outside the firm, and managing the dynamic of the family. The next gen need to get to grips with family governance, especially as the business gets older and the family gets bigger.
We’ve been working with family firms for decades – in fact many of the current generation of family business leaders were next gens 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.
The next gen have great expectations – we want to help make them a reality.