After rising to the challenges of the pandemic, Canada’s family businesses are confronting fresh complexities. New thinking and perspectives will be key to addressing climate change, digital disruption and pervasive economic uncertainty, both today and beyond.
As our Global NextGen Survey 2022 shows, you—the next generation of Canadian family business leaders—are ready to find solutions by challenging years of established thinking. But to fully unlock your potential, you’ll have to prove you’re ready to grow the business, secure your family’s legacy and manage its wealth. Earning the necessary credibility and overcoming resistance to change will require new skills, experience and communication. In short, you’ll need to build trust between generations to earn your licence to operate and take full advantage of key opportunities in the years ahead.
Many of you are already playing significant roles within your family business. But you’re looking to do more. You have clear ideas on what’s needed to ensure the business’s future success and you’re eager to turn your ambitions into action.
It’s no surprise that business growth—an important issue for all enterprises—is a priority for nearly three-quarters (74%) of you. But you’re also keenly focused on talent management at a time when the world of work is changing. Remote work means many companies can access a broader group of candidates than ever before. But it’s also forcing companies to be more mindful and deliberate about building a strong organizational culture that attracts and retains the best talent.
While you hope to become more deeply involved in these and other priority areas in the coming years, many of you find yourselves on the sidelines. Outside of business growth, fewer than half of you say you’re currently engaged in your priorities for the business. That same disconnect is felt in other areas, too. Only one in five (21%) say you’ve led a specific change project or initiative within the business. The same proportion say the family business’s senior management only defers to your expertise in specific areas.
There are likely multiple factors at play here. But clear communication and generational contracts can help you prove your readiness. We’ve seen how powerful the outcomes can be when families come together to talk about the capabilities their business needs to achieve its goals and where gaps currently exist. This helps them to map out opportunities for NextGens to play progressively greater roles in the family business as they gain specific skills and experiences.
From your own personal point of view, what would be your priorities for the company over the next two years?
COVID-19 has brought many family businesses closer together as multiple generations focused their efforts on common goals. Nearly two-thirds (65%) of our respondents say communication between family members about the business has increased during the pandemic. It also brought many of you closer to the business itself. More than a quarter (26%) say COVID-19 increased your commitment to your family business. While that number is significant, it’s notably lower than the 43% of your peers globally who also say their commitment grew during the pandemic—reflecting, in part, COVID-19’s uneven impact on businesses across Canada.
At the same time, the pandemic has created opportunities for many of you to take on new initiatives in the family business. Nearly a third (32%) say COVID-19 led to you leading a specific project—an opportunity afforded to far fewer of your global peers (14%). In particular, we’ve seen you apply your digital acumen by introducing new technologies to your business or family office. We’ve also seen the pandemic prompt the current generation to reflect on their succession plans and the importance of bringing you into the family business. Nearly half (44%) of you say your involvement in the family business was brought forward or increased during COVID-19.
This experience will no doubt prove invaluable. But there are additional opportunities during this critical period to build the knowledge and expertise that will help you win the trust of the current generation. While only 6% of Canadian NextGens say the pandemic revealed a need to upskill or obtain more education (compared to 28% globally), a multidisciplinary approach to business and leadership can help you navigate the transformational years ahead. Personal development and training in areas such as sustainable value creation are key steps in preparing to lead and grow your family business.
Overall, would you say that the COVID-19 pandemic has…
You’re keen to get to work solving the challenges of tomorrow. The good news is that many family businesses put more thought into succession planning during the pandemic. But that doesn’t guarantee the process is straightforward or imminent. In many cases, the current generation isn’t prepared to turn over control quite yet. More than half of you (56%) say the ability or readiness of the current generation to retire is a challenging aspect of succession. And more than a third (38%) also expect it will be hard to prove yourself as a new leader or board member.
The absence of a succession plan itself is also a barrier for some. One-third of you say your family business has no succession plan or you’re unaware if one exists. Documenting clear stages and conditions of succession creates more certainty for the future, reduces risk and lays the foundation for your business and family to thrive in the long term. It’s important for the current generation of owners to be transparent about their expectations for your future role. At the same time, there’s an opportunity for you to take initiative as the details of your family business’s succession plans are ironed out.
Part of this preparation involves clarifying the values and sense of purpose that will guide your decisions and ensure your family’s legacy. Many of you are coming at this issue from a position of strength: nearly four in five (79%) say your family has a clear set of values. But only 62% say your family’s values and mission are written down. While that puts you ahead of your peers in other countries—only 47% of NextGens globally say their family values are documented—there’s still room for building greater understanding between generations. Family values, policies and mission statements should be clearly and concisely written down. These documents should be regularly reviewed and updated, when necessary, at family meetings to reinforce their importance and clarify any misunderstandings.
In your view, how easy or difficult are the following aspects of succession?
You told us your focus is on expanding the family business, hiring top talent and diversifying into new markets. These are all important. But you also realize that growth alone is not enough. Creating sustained value is multidimensional, and you’re preparing to position your family business to make an even greater impact on your community and beyond.
Addressing environmental, social and governance (ESG) matters helps secure customers, attract and retain top talent, lower the cost of capital and improve company valuations. But fewer than a third (32%) of you say sustainability is at the heart of everything your business does. This is an area where Canada is falling behind other countries. Globally, 55% of NextGens say sustainability is central to their business. While the reasons behind this gap vary from industry to industry—and even business to business—the results of our 25th annual CEO Survey offer some insights. Among companies without a carbon-neutrality or net-zero commitment, Canadian CEOs were more likely than their global counterparts to say their organization doesn’t emit a meaningful amount of greenhouse gases and lacks the capability to measure them. We also know that, generally speaking, many companies in other parts of the world—particularly in Europe—began their ESG journey earlier and now have a head start.
At the same time, Canadian NextGens understand the importance of doing more. Consistent with what you told us in last year’s Family Business Survey, a majority (56%) see the opportunity for your company to lead the way in sustainable business practices—a slightly higher proportion than the current generation (50%) of family business leaders. That generational gap widens on perceptions of the role businesses should play in addressing climate change. While more than two-thirds of NextGens (68%) believe they have a responsibility to fight climate change, only 44% of the current generation feels the same way. This is a chance for you to play a leadership role. With the right knowledge and expertise, you can help the current generation of owners see the value of a credible path to net-zero carbon emissions and use ESG to achieve growth today, shaping your family’s legacy for the future.
Do you agree that...
Winning the confidence of the current generation is a key step on your journey to grow the business, secure your family’s future and oversee its wealth. Here are five specific opportunities that can help you earn your right to challenge the status quo:
Not all succession plans are created equal. While we know many family businesses may be thinking about succession, there are signs that those plans are not fully articulated and may be lacking input from key stakeholders, including yourself. Now’s the time to work out the details. It’s often helpful to start by assessing your succession planning capacity and pinpoint the long-term objectives that will help guide future decision making.
Identifying the leadership skills required for the business to thrive is a key part of a generational contract and succession plan. At the moment, nearly a third (32%) of you say you’re keen to obtain additional leadership development and other soft skills to prepare for your future role in the family business. That’s a solid start—48% of your peers globally feel the same way. As we’ve seen in recent years, leadership today requires new approaches and competencies. There’s an opportunity to further cultivate your mindset through a combination of education, networking and professional experience.
You may be ahead of the current generation on ESG, but risk falling behind your global peers in making sustainability a source of long-term value. Demonstrating that your environmental and social principles align with those of your customers—as well as employees and other stakeholders—can create real returns. We saw this reflected in the results of our 25th annual CEO Survey. Half of privately owned Canadian companies with fewer than 500 employees say their customers choose their products or services because of their company’s values. Now’s the time to be bold and create impact through ESG with a strategy-led plan for action, including a credible net-zero commitment.
Only slightly more than half (53%) of you believe your business has strong digital capabilities. For some, this is an area requiring fresh perspectives: nearly one in five (18%) NextGens believes the current generation doesn’t fully understand the opportunities and/or risks for digital within the business. As you work to close this gap, it’s important for your company’s digital transformation—like any other major change—to be part of your overall business strategy and reflect your family’s long-term vision and values. With that foundation in place, you’ll be able to use your digital acumen and inherent agility to your advantage. Our CEO Survey shows this is an area where smaller Canadian companies have a clear edge over their larger counterparts, which tend to take longer to approve and commit resources to major initiatives.
Many of you see benefits in learning what’s working for other up-and-coming leaders like you. More than half (53%) of you say you’ve built networks with NextGens from other family businesses. Strengthening and growing those connections will prove invaluable as you move into new leadership roles. Earning your family business’s licence to operate requires what we call a community of solvers: people coming together to combine human ingenuity, experience and technology innovation.
We invite you to join us to exchange ideas and experiences, and determine a leadership style that learns not only from previous generations, but is also distinctly your own. Contact us to learn how the NextGen Connect program can help you make connections, learn and lead.