Originally published at pwc.com. PwC is a Hall of Fame company.
Growth is the lifeblood of family business, essential to ensuring the business will continue to prosper for future generations. For the next generation of family business leaders, growth and sustainability go hand-in-hand. In new research from PwC, 65% of next generation (NextGen) family business members say achieving business growth is a top priority. At the same time, nearly the same number, 64%, say their family business has the opportunity to lead the way in sustainable business practices. More than half, 55%, believe their family business puts sustainability at the heart of everything they do, while 71% recognize their business has a responsibility to fight climate change and its related consequences.
PwC’s Global NextGen Survey 2022 surveyed more than one thousand NextGen members in family businesses across 68 countries globally to understand their key priorities and challenges.
“It is difficult for a family business to survive multiple generations. The NextGen members we spoke with, like the current generation, understand the fundamental need for growth to create value for future generations,” said Peter Englisch, Global Family Business Leader, PwC Germany. “The NextGens also recognize that it will take new approaches and skills to drive growth and keep the business thriving. It makes sense that addressing sustainability and climate change are high on their agenda.”
While NextGens clearly see sustainable business practices as integral to long-term success, the Survey shows they may need to step up their engagement in the near term. Areas where NextGens say they are actively engaged at present include achieving business growth (59%), ensuring the business is offering the right products and services (50%) and adopting new technologies (44%). Only 28% say they are currently engaged in increasing the focus on sustainability and impact, though 72% say they expect to be involved in it in the future. Similarly, just a quarter of NextGens say they are presently engaged in reducing their business’ environmental impact, where 65% expect to be in the future.
Pandemic impacts NextGen family business participation
The COVID-19 pandemic was a double-edged sword for NexGen involvement in the family business. Close to half of respondents, 43%, say they feel more committed to the business than they did prior to the pandemic and that they are now more involved in the business. More than half, 56%, believe that communication between family members about the business increased during the pandemic. But the uncertainty created by the pandemic also appears to have made the current generation less likely to relinquish control and more difficult for NextGens to establish themselves. Only 28% of NextGens say they are given significant internal operations to run, compared to 48% in our 2019 survey; 32% say they are used as a sounding board, down from 36% in 2019; and 45% find it difficult to prove themselves as a new leader or board member.
Reluctance of the current generation to retire poses a particular challenge for NextGens, according to 57% of those surveyed. Further, 39% of the NextGens say there is resistance within the business to embrace change.
A very positive development for NextGens and family business in general is that 61% say the family has a succession plan and 39% of NextGens say they were involved in its development.
“Robust succession planning is essential for the family business. NextGen leaders have become more engaged and committed to the business — the challenge is to build confidence between the current and next generation,” said Englisch. “Our survey shows communication has increased and this is a good basis for a new generational contract. This is the time to flesh out succession plans and to define the leadership skills required to deliver growth in the future, the key benchmarks on the route to succession and what NextGens must do to demonstrate they are ready to take the reins. That way the current generation can transition to a supporting role with greater confidence.”
NextGens Bring Fresh Perspective
PwC also recently surveyed the current generation of family business owners, and while they see eye to eye with NextGens in a lot of areas, there are some notable differences. Both generations are focused on growth, but only half of the current generation believe their business has a responsibility to fight climate change and its consequences, compared to the nearly three-quarters of NextGens. A similarly high percentage of NextGens (76%) believes their business is actively contributing to the community, again compared to just over half (54%) of the current generation. There is also a bit of a digital divide between the generations. Similar percentages, 42% of NextGens and 38% of the current generation believe their business has strong digital capabilities, but a third of NextGens say the current generation does not fully understand the opportunities and risks for digital within their business.
Family Business Can Better Empower Female NextGens
The survey shows that many family businesses could gain from bringing greater attention to the relative roles of their male and female NextGen members. Far fewer of the women NextGens surveyed, 43%, are in leadership roles than the male respondents, 59%. Not surprisingly perhaps, fewer women, 66%, have a clear idea about their personal ambitions for a future role in the family business compared to men NextGens, 79%. Moreover, for the top-ranked priority area of achieving business growth, just half of women, 53%, say they are actively engaged, compared to 69% of men. Women play a relatively active role compared to men in areas including improving working conditions (44% to 46%), increasing the focus on investments for sustainability and impact (33% to 29%) and reducing the organizations environmental impact (27% to 26%) but there is the opportunity for women to play a larger role in many of the key priority areas.
“Family business is a good barometer for the global economy and we are encouraged by the findings of our survey,” said Englisch. “The NextGen of family business sees the vital link between ESG and growth. They are ready to learn, adapt and play a larger role in shaping the future for the business and the family. The commitment we see from the NextGen gives us optimism for a future built on sustainable growth.”