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Management

Family business leaders want change but worry about family politics

A new PwC survey shows next gens are experiencing more challenges, both inside the firm, and in the wider business landscape.

Glenn Baker
Glenn Baker
April 17, 2016 4 Mins Read
491
The next generation of family business leaders are well prepared, confident, and above all they have great ambition – both for themselves and for their firms. 88% want to do something special with the business, not just bigger and stronger, but more international, more diversified and more modern.
Great expectations: The next generation of family business leaders Survey shows next gens are experiencing more challenges, both inside the firm, and in the wider business landscape. Talking to 268 next generation family members likely to take over the business from 31 countries worldwide, including New Zealand, the survey shows that 60% want to take the business into new geographic markets. They are exploring new ideas, new products and even new business models. 
PwC has been running an international Family Business Survey for over a decade, and in 2014 added it’s first-ever survey of leaders-in-waiting. This survey asked the next generation about their personal ambitions, their plans for the future of their business, and the unique challenges of being the “boss’s child” and identified three key gaps threatening the successful transition from one generation to the next: 
• The generation gap: the current generation is not always confident that their children are ready and able to take over.
• The credibility gap: The next generation say they have to work harder than others in the firm to prove themselves.
• The communications gap: Family businesses have to manage personal as well as professional relationships, and this brings with it the possibility of conflict.
 
Ready to make their mark
Two years on, the picture has changed – and broadly for the better. The next gens’ confidence has risen, their horizons have widened, and their preparation for senior roles has improved. For instance, 70% have worked outside the family firm to gain useful experience and bridge the credibility gap before joining the family business. Survey respondents say they want to be more than just caretakers: they also want to leave their stamp on the business and are not timid about bringing in outside help to achieve their goals. 69% would bring in experienced non-family managers to help modernise or professionalise the business.
“The consensus among New Zealand family business leaders is also that gaining external work experience is vital to ensuring that the business remains relevant and evolves with market changes. Bringing in external expertise from non-family members is great but if family members want to become leaders, they need to have a diverse knowledge base in today’s rapidly changing world,” says Maurice Noone, regional managing partner at PwC New Zealand.    
 
Revolution or evolution?  
Despite their growing confidence and clear ideas of where they want to take the business, these next gens still experience a strong “pull of the past”. They aim for a revolution, but for the time being foresee an evolution – at best. 40% confessed to some degree of frustration in trying to get new ideas accepted by the current generation and 52% are worried that they will need to spend time managing family politics.
While family firms can – and do – reinvent themselves, not all of them manage to adapt that quickly, and there can be a tension between respecting the processes (and the products) of the past, and seizing the opportunities the next gen see for the future. For instance, 59% of next gens would like to diversify their product portfolio, but 68% believe their firm is unlikely to make this change, even a decade ahead.  
However, a New Zealand case study on page 17 of the Survey reveals that this family owned business “spent a lot of time monitoring trends” in their sector and they felt they couldn’t afford to “be left behind”.
“Our experience in New Zealand shows us that digital and the role of technology are increasingly being used to improve productivity. However, this also brings new challenges as recent regulatory changes such as the the Health and Safety at Work Act, require closer monitoring policies,” says Noone. 
 
The succession question
Succession is still a worry for those taking over family firms. Unknowns such as how the current gen will adapt or how the next gen themselves will measure up are still a major factor. 
Also, a reluctance of the current generation to let go – what we’ve referred to in the past as “sticky baton” syndrome. 61% believe that it will be difficult for the current generation to fully let go when they take over. 
“Addressing the family dynamic is just as important to the family firms we work with. We’ve found that the firms that approach this as a long-term process with the involvement of all family members end up with the most successful outcomes,” concludes Noone.
 
For a copy of the full report from 13 April, please visit https://www.pwc.co.nz/nextgen.

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Glenn Baker
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Glenn Baker

Glenn is a professional writer/editor with 50-plus years’ experience across radio, television and magazine publishing.

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