Australia’s next generation of family business leaders is more confident and better prepared for senior roles than two years ago, but is also experiencing more challenges, both inside the firm and in the wider business landscape, according to a PwC report released today.
PwC’s global next generation survey showed almost one third of the next generation think family businesses are slower than other types of businesses to keep up with new technology, and 40 per cent said they had experienced frustration trying to get new ideas accepted by family members.
“It’s understandable the current generation is cautious about making big investments in digital, considering how fast technology is changing. However, standing still is not an option,” said PwC’s Head of Family, Business & Wealth, Stuart Morley.
Having a strategy fit for the digital world is seen as key, but less than half of the businesses surveyed had ever discussed the threat of digital disruption at board level, and alarmingly, 72 per cent of next gens didn’t think their business was at risk of digital disruption.
“Digital is playing a significant role in shaping the business environment. The trick for family businesses is to harness the unique qualities that make them different, such as ownership structures that allow decisions to be made for longer term pay-off, and use this to their advantage,” Mr Morley said.
Another key theme is the issue of professionalising the family business, with nine out of ten respondents agreeing that having non-family members in key positions was a positive thing, up from eight out of ten in the last survey in 2014.
However, when it comes to professionalising the family, we are seeing less progress, despite more than half of the next generation expressing concern about managing family politics and disputes in the future (up 16 per cent from 2014).
“Family businesses often don’t fail for business reasons, but for family reasons. The most successful family businesses strike a balance between professional management, responsible business ownership and a healthy family dynamic – particularly when it comes to handling next generation issues,” said PwC’s Executive Chairman of Family, Business & Wealth, David Smorgon.
“As the number of family members and in-laws grow, so too does the risk of misunderstanding and conflict. These challenges need to be considered early and regularly, and in a structured and consistent way.
“Professionalising the family is about establishing accountabilities and responsibilities, and ensuring ongoing, transparent communication. It’s important to foster a culture of openness and willingness to deal with conflict so next gens feel safe to express their views, knowing that whatever comes up will be dealt with fairly and constructively,” he said.
The survey also canvassed the next generation on succession, which is still a worry for those wanting to take over family businesses. The next generation feel there is some reluctance on the part of the current generation to ‘let go’, with 61 per cent of respondents indicating they expect this to be an issue when they take over.
“Managing succession is the most important challenge for most family businesses. The failure to identify, plan and implement succession is the greatest threat to family business survival,” Mr Smorgon said.
“Succession planning is a process, not just an event. Only when the right structures and processes are in place, supported by regular and effective communication and the appropriate training and education, will the family give itself the best chance of continuity and harmony.”
PwC has been running an international family business survey for more than a decade and in 2014 added its first-ever survey of leaders-in-waiting. More than 260 next generation family members likely to take over the business from 31 countries worldwide, including Australia, were involved in the 2016 survey.
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