More than 80% of family businesses do not have a robust succession plan and 75% of firms with CEOs aged 65 or older still have no succession process in place, new research has revealed.
The biennial PwC Global Family Business Survey of 2,800 family businesses found just over half (53%) have succession plans in place for some, if not all senior roles, but only 30% of these 'plans' are properly documented.
The need to professionalise family businesses, of which creating formalised succession plans was one part, was a key concern for family firms, with 40% flagging it as a key challenge over the next five years.
PwC's network middle market leader, Henrik Steinbrecher, warned: “A plan that is not written down is not a plan; it's just an idea. And this is an issue family firms must address with the same commitment and energy as they are devoting to professionalising other aspects of the business.”
“I've never met a family business who said they started succession planning too soon,” said Paul Drechsler, chairman designate of the UK's Bibby Line Group, commenting on the research findings.
The survey found advances have been made in professionalising the family, as well as the firm with 83% of firms having a mechanism to deal with family conflict, these included:
• Shareholder agreements (54%)
• Family councils (32%)
• Third-party mediation (27%)
• Family constitutions (22%)
The high levels of family businesses without formal succession plans may be driven by the fact that only 40% of respondents intend to pass both ownership and management to the next generation (down 1% from 2012).
The number of family firms looking to maintain control of the business, but bring on professional managers also saw a notable rise in 2014, up 7% from 2012 to 32%.
Although 65% of respondents reported growth in the past 12 months, all were keenly aware of the impact technological advances could have on their businesses. Almost 80% ranked the growing impact of digital technologies as one of the top three trends in the next five years.
The survey interviewed family business executives from 40 countries with a sales turnover of more than $5 million to more than $1 billion.