After a 2020 that was nowhere near what most of us anticipated, it’s perhaps bullish to make predictions about 2021 but Tom McGinness, KPMG’s Head of Family Business, is not deterred from outlining the top 10 topics that he expects to be discussing with those leading family businesses during the coming year.
1. Reviewing shared purpose
From a tough post COVID-19 business environment, to a focus on ESG and the rising influence of the next gen, factors are combining to encourage families to be really clear on their shared purpose. This will often involve exploring their charitable and community-based objectives. We are seeing a relationship between clarity of purpose and commercial performance.
2. Tax agenda concern
Many in family businesses are concerned about potential changes to CGT and IHT which will prevent tax effective succession planning and now of course there is the likelihood of a wealth tax in the Spring Budget on 3 March.
In a more volatile world, with markets changing faster, a number of family businesses with a shrewd eye on the horizon will be in a different line of work by the end of the year. Diversifying will help some to manage future risk and to provide wealth for future generations.
4. Attracting and retaining talent
This has been at or near the top of the agenda, often under the heading ‘threats’ in family firms in recent years. The pandemic has though delivered some new insights that will require action, having highlighted talent in their teams which wasn’t previously visible and equally highlighted some underperforming staff.
5. Role and voice for the next generation
Both anecdotally, based on what our clients tell us, and via research, such as our millennial impact report, it’s clear that the younger generations are more alive to and passionate about ESG concerns. We are seeing a rise in those leading family firms seeing a benefit in giving their next gen a meaningful role in the business, responsible for an area that aligns with their own sense of purpose.
6. Conflicts and governance
There’s nothing like a period of challenge and change to put pressure on family relationships in the business. This links to family governance which experience tells us helps families to communicate, make decisions and problem solve. Governance structures are a practical tool, as opposed to simply good practice.
Not just a matter of the business coping with challenging economic circumstances but the governance structure’s ability to manage risk and protect wealth, especially with third and fourth generation families having to fund extended families. Governance impacts this, with our STEP Global Family Business report finding that family businesses with more than one governance tool enjoy stronger performance.
8. Technology and data
The appetite for systems and data able to bring real insight to commercial decision making, from managing liquidity to strategic planning, continues to rise exponentially.
9. Mindset shift
I see increasing evidence that families are thinking more about future opportunities than present concerns. There’s an exciting degree of planning their business of the future, from new markets to new products or new processes, often with digital transformation at its heart.
10. Increasing non-family talent
Families will continue to recruit more non-family executives, non-executive directors and “family advisers” as they increasingly seek the skills they can bring, particularly in a fast changing environment.