The Challenges That Lie Ahead For The Next Gen
24th April 2016 Paul Andrews
Latest research from PwC shows the the next generation of family business leaders – or next gens - are well prepared, confident and ambitious, yet see some significant challenges ahead.
- 70% of next generation leaders have worked outside the family business to gain experience.
- Almost 70% would bring in experienced non-family managers to help modernise and professionalise the workplace.
- More than half worry they will need to spend time managing family politics.
- Only 41% believe their business has a strategy fit for the digital age.
- 61% believe that it will be difficult for the current generation to fully let go when they hand over the reins– the sticky baton syndrome.
In the next five years, 40% of family businesses globally will prepare to hand over the business to a new generation. According to new global research by PwC entitled, Great Expectations: The next generation of family business leaders, the next generation of family business leaders – or next gens - are well prepared, confident and ambitious, yet see some significant challenges ahead.
88% of those surveyed want to do something special with the business, not just bigger but more international, more diversified and more modern. 60% say they will take the business into new geographical markets and almost 70% intend to bring in experienced non-family managers to help modernise and professionalise the workplace.
Sian Steele, UK family business leader at PwC, said that "The leadership handover from one generation to the next is a crucial transition for the continued success of a family business. The ‘next gen’ leaders want to be more than just caretakers, they want to make their mark, to move the family business forward and diversify. Exploring new ideas, new products and even new business models. At the same time they are experiencing more challenges - both inside the business and in the wider business landscape.”
It’s clear from the survey findings that there is more focus on how to prepare for senior roles and create the right career path - 70% of next gens have worked outside the family business to gain experience. They have a deeper and more nuanced understanding of what running the family business is going to mean in the coming years and are equipping themselves with the skills to help take the business forward and are not afraid to bring in outside help to do this.
Clare Stirzaker, UK family governance leader at PwC, added, “When it comes to career planning, we find that families want their next gen to better understand the world of business by joining external network groups. Gaining perspectives from others and building a network of their peers can be a really effective way to learn and contribute to their family business.”
Despite their growing confidence and clear ideas of where they want to take the business, these next gens still experience a strong ‘pull from the past’. Their aim is for a revolution, but for now it’s more of an evolution – at best. 40% confess to some degree of frustration in trying to get new ideas accepted by the current generation and 52% worry they will need to spend more time managing family politics.
Whilst family businesses can and do reinvent themselves, not all of them manage to adapt quickly, and there can be tension between respecting the processes (and the products) of the past, and seizing the opportunities the next generation see for the future. For instance, 59% of next gens would like to diversify their product portfolio, but 68% believe their business is unlikely to make this change, even a decade ahead.
Many next gens struggle to convince their parents that the firm needs to do more on digital. Only 41% believe their firm has a strategy fit for the digital world and 29% believe that family businesses are slower than other types of business to keep up with new technology. Only half has ever discussed the threat of digital disruption at board level.
Sian Steele, UK family business leader at PwC, added “Digital is an obvious area where a generation gap still lingers. Technology and digital adoption are recognised as key components of a successful business in the future and yet can be an area of resistance with the current generation.”
Succession is still a worry for those taking over a family business. Unknowns such as how the current generation will adapt or how the next generation will measure up are still a major factor. 61% believe that it will be difficult for the current generation to fully let go when they hand over the reins – the sticky baton syndrome.
Sian concluded, “Succession has always meant risk. How will parents adapt, how will the next generation measure up. Getting succession wrong can be devastating. Getting it right requires long term planning. It’s a process not a one-time event. It means dealing head on with the emotional issues as well as financial ones and it requires consideration with manager roles and roles within the family. The next generation need to be fully prepared to take over, with their parents’ support, and after the formal handover the parents can continue to offer help and guidance, as long as they accept they’re no longer making the decisions.”
Download the full research report here