Succession in family firms has never been such a hot topic. Change is underway at the top of family businesses, triggered largely by the pandemic.
Over the past couple of years, our conversations with clients at family businesses kept suggesting a departure from the status quo when it came to their leadership. As we’ve been developing our new Family Business Leadership Academy programme, we wanted to know more than even the busiest schedule of conversations could reveal. And after polling hundreds of family business leaders, we found our anecdotes were indeed correctly signposting a wave of change.
But, it won’t surprise those within family businesses, that while the pandemic changed plans for leadership and succession at 40% of firms, the decisions made and actions taken are varying widely.
Commitment to family ownership remains steadfast, with just over seven in ten family business leaders intending that their children take over the business when they retire.
Diverging changes to succession
Beyond that though, paths diverged, split between accelerating, versus decelerating or even reversing succession steps. As businesses faced challenges like never before, through the lockdowns of 2020 to today’s cost of living crisis, transformation became the top agenda item at many companies, generally linked to making sales and operations more tech based. At just under half the businesses that changed their succession plans, the senior generation either delayed their retirement plans or leaned back into the business, presumably fearing that managing succession on top of other risks was too much change at once. On the other hand, a third of the leaders to change plans stepped back from the business earlier than previously intended. Running a business with tech at its heart perhaps wasn’t their skillset, so they largely stepped aside to let the next generation lead the firm into a much-changed future. One in seven of the businesses that changed course looked for new leadership, with the necessary skills, outside of the business.
Interestingly, beyond what is happening right at the top of the tree, at four in ten of the firms changing post pandemic, the next generation have become more involved in the management, though not taking over the leadership. We’ve heard about younger family members stepping in or up swiftly as their skills became critical to the success and survival of their businesses. Looking ahead a year or two, given the retirements that were postponed or reversed during the pandemic, we can expect to see another uptick in the next generation taking the reins, due to pent-up demand for stepping back by the current generation of leadership.
A third of family firms anticipate that products developed in the past 12 months will drive their future growth. We believe this is evidence of transformation begun during the pandemic and uncovered in KPMG’s 2021 Mastering a Comeback global report which found family businesses were 42% more likely to implement a transformation strategy than non-family businesses. But work on this front is far from done, with considerable change still anticipated; in fact nearly one in five current family business leaders expect their company to be a quite different enterprise in the longer term, focused on new products or markets.
Family Business Leadership Academy
The world the next generation of family business leaders inherit is fundamentally different from even three years ago, let alone the time their previous generation took over. We see a need to augment lessons passed on by previous leaders with insight from world-class academics and peers. In this context, KPMG Private Enterprise launches The Family Business Leadership Academy, in partnership with the University of Leeds, to help the new-in-role now generation and the next generation to successfully run their family businesses. The 30-week course, of virtual and in-person teaching, begins early 2023 to equip new and aspiring family business owners and managers with leadership, stewardship and commercial skills. And, given nearly four in ten family business leaders told us they turn to peers for advice and support, we hope learners at the Academy will form bonds with fellow next generation leaders which may prove to be lifelong trusted relationships.
For more information on KPMG’s Family Business Leadership Academy, click here.