Bangkok--31 May--PwC Thailand
The next generation of family business leaders are more confident and better prepared to lead than two years ago, but getting their voices heard in formulating strategy remains a key challenge, a PwC study says.
PwC's survey Great expectations: The next generation of family business leaders polled 268 members of family-run enterprises who were likely to take over the business from 31 countries worldwide.
It shows that 60% would take the business into new geographic markets. They are exploring new ideas, new products, and even new business models. At the same time, next gens are experiencing more challenges, both inside the firm and in the wider business landscape.
Family has always been at the heart of business, and remains a vital part of the world economy –accounting for 70-90% of global GDP. In the next five years, 40% of family businesses globally will prepare to hand over the reins to a new generation.
Sira Intarakumthornchai, CEO of PwC Thailand, said that the next gens are no longer taking roles in the family business simply because they are a child of the boss.
"Next gens now have stronger beliefs and are confident that they can change the business for the better," he said. "They care more about future success."
This year, 92% of next gens feel a responsibility to hand over a sound business to the generation after them. Some 88% want to do something special with the business: Not just make it bigger and stronger, but more international, more diversified and more modern.
"The readiness of the next gens is a positive sign for the family firm. However, the challenge is whether these family firms are ready to reinvent themselves to support and respect the opportunities the next gens foresee for the business," Sira said.
This year's survey found that next gens' confidence has risen and their preparation for senior roles has improved. Some 70% have also worked outside the family firm to gain experience.
To grow the family business further, 69% would bring in experienced non-family managers to help modernise the workplace, while 59% want to diversify its products and services. Even so, 68% believe their firm is unlikely to make this change, even a decade from now.
Family politics is one of the top concerns of next gens, with 52% (up from 36% in 2014) saying they're worried that they'll need to spend time managing it.
On top of that, digital is an area where a generation gap still lingers. Next gens often struggle to convince their parents that the firm needs to adopt and adapt to digital technology. Some 41% of them believe that family firms are slower than other types of business to keep up with new technology.
The study also reveals three 'key gaps' that threaten the successful transition from one generation to the next:
1) The generation gap: Even though the confidence of next gens is rising, the report shows that the current generation isn't always confident that their children are ready and able to take over.
2) The credibility gap: Next gens say they have to work harder than others in the firm to prove themselves.
3) The communication gap: Family businesses have to manage personal as well as professional relationships, and this could result in conflict.
Sira said that it's important for the family firm to acknowledge these gaps and find ways to resolve issues between the two generations. Having a proper family succession plan in place could help to smooth the transition process.
Getting it right
This year, next gens are still concerned about managing the succession process successfully. They are seeking the best way to ensure that their parents still feel involved and able to contribute, while making the transition to a more passive role.
In PwC's previous study, the 3 'S's – skills, scale and succession – are identified as the critical success factors for family businesses. This year, there is a fourth 'S' to add that will be crucial as next gens adapt to today's business environment: stakeholders.
"Family businesses need to ensure that generational change happens constructively and that the succession process can lead to business success," Sira said.
"Getting it right requires long-term planning from dealing head-on with emotional issues as well as financial ones. The right structures and processes need to be in place, supported by effective communication, training and education."