Primogeniture is no longer the norm when it comes to succession planning, a new family business report reveals, with daughters and younger siblings worldwide increasingly taking up executive positions.
According to Succession reset: family business succession in the 21st century, released out of Australia, 69% of family businesses do not believe the first-born son should be an automatic heir in succession planning. It surveyed 2,650 people worldwide and from 56 countries.
Although gender bias was still evident, the report says businesswomen are increasingly climbing the ladder at family firms, as were younger next-gen siblings, or even nieces and nephews.
Several female executives have recently taken high profile appointments at their family businesses, including Ana Botin, who became chair of Spanish bank Santander following the sudden death of her father in September. In the US, Abigail Johnson recently succeeded her father at Fidelity Investments.
Historically, many family businesses have had '& Sons' tagged on to their company name, but the report says this is now outdated.
“The traditional definition of family business succession is no longer relevant in the current environment,” report author Dr Richard Shrapnel says. Instead succession planning is entering a new era focused on “the generational transfer of skills that create wealth and a passion for business.”
Just recently, Australian family business Sue Ismiel & Daughters, which creates Nad's hair removal cream, formalised succession plans for next-gen Nadine Ismiel to become chief executive when her mother steps down.
Families generate up to 90% of global GDP, said the report, which was released by business advisory firm Pitcher Partners and Australia's Swinburne University.
Shrapnel says having robust succession plans in place was imperative as Baby Boomers (those in their fifties and sixties), who control much of the world's privately-owned businesses, prepare for retirement. The report found 85% had not fully prepared their succession plans.
This is similar to findings from a report released by PwC earlier this month, which found only 16% of families have a plan in place “that would qualify as a robust succession process”. For respondents over 65, this figure was still low, at just 25%.
Shrapnel says: “If this transition is not handled well, it may impact the prosperity of the many economies in which these businesses operate and could see decades of business experience lost and the competitiveness of businesses being weakened.”
He says succession planning needs to commence the day the business starts. “Succession determines the capital value, worth, market price and value of any business and, therefore, a family's wealth.”