Next gens keen to take fitting role at family businesses

17 November 2017 Consultancy.uk

One of the key challenges faced by modern family businesses is that of succession. Aside from general hurdles faced by all businesses, finding willing heirs to the business is key to their survival, as only 50% of “next-gens” hope or expect to take on the management of their family enterprise.

Family businesses remain a cornerstone of the UK economy, offering a broad range of more social business models, focusing on wider cultural basis than just growth and profit. Despite this, management succession in family businesses can be a relatively complex processes, needing to take into account the requirements from the business itself, the will of the candidate who comes to take on the new role, as well as the expectations of the wider family. A previous survey from EY found that the next generation are reluctant to take up the mantle of their family business, with less than 5% of respondents choosing to succeed in their family firm, compared with as many as 34% stating that they desired to found their own company.

Now, a new study from Big Four professional services firm PwC, involving 268 “next gens” (adults potentially in line to take over their family business in the future) globally, has reviewed the succession process.

Top transformation factors by generation

The survey asked what next gens considered to be the major trends of the coming five years in their business. In terms of the wider business environment into which next generation family members are rising, different generations rate various issues as their top priority for the future of the business. PwC then contrasted these responses with elder family business leaders and global CEOs.

Advances in technology were the most prominent trends, cited by 83% of next gens, compared to 79% of current generations and 77% of global CEOs in general. A shift in global economic power, with South East Asian economies projected to become world leaders by 2030, follows, at 63% of next gen respondents, 60% of those from current generations, and 58% of global CEOs.

Resource scarcity and climate change are higher on the agenda of family businesses, particularly with future generations, partly due to their longer-term outlook, as their tenures at the top of the company will likely last a considerable number of years.Rising through the ranks

The survey found that, in general, those who took a role at the family firm either entered at the trainee level (25%) or into a junior role (40%), although a considerable number of respondents, particularly those who built external experience, entered into middle management (24%). PwC also noted an increasing trend for family talent to join the firm initially, before building experience at various other companies and subsequently returning to the firm.

Great expectations

The survey group would rise through the ranks relatively quickly, with almost 48% rising to board level at their company, while 42% were ‘promoted’ into senior management positions. While succession continues to see those who take on roles climb into the upper ranks, candidates are increasingly unclear about their career paths, at 44% compared to 50% in the previous survey.

Next generation treatment

In terms of how the next generation is treated, once they ascend to the family businesses, candidates highlight that their being ‘family’ incurs various costs, and benefits. For instance, 88% of respondents expect to have to work even harder to prove themselves to the company.

In equal measure, the family tends to have a less shakeable confidence in their respective ability – allowing more room for manoeuvre – though roughly half of respondents said that they have not been given preferential treatment because of their status as a family member. 65% say that they are properly appraised, even though they are a family member. A work/life balance does seem to become more difficult to maintain, meanwhile, with 69% noting that they have difficulty separating home and work life.

Next generation expectations

When it comes to the role that next gens expect to hold in the family business, a majority of 88% expected to be offered senior roles, though some variation was noted regarding the details of succession. 50% of respondents said that they hope or expect to come to manage the company one day. Around 32% of these are hoping to, but have no current agreement in place for ascension to the top job.

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