According to a recent survey conducted by PwC, the next generation (NextGen) of family business leaders believe that growth and sustainability go hand-in-hand, but there is still more action needed on sustainability. The survey, which included over 1000 NextGen members in family businesses across 68 countries globally, including Ireland, found that 65% of respondents see achieving business growth as a top priority. At the same time, nearly the same number, 64%, believe that their family business has the opportunity to lead the way in sustainable business practices. However, only 28% say they are currently engaged in increasing the focus on sustainability and impact, though 72% say they expect to be involved in it in the future.
The survey also found that 71% of NextGen members recognise their business has a responsibility to fight climate change and its related consequences, yet 45% do not believe their family business puts sustainability at the heart of everything they do. PwC’s John Dillon, leader of PwC Private, said that the survey shows that sustainability will be key to long-term growth, despite the short-term issues posed by the war in Ukraine, rising prices and supply chain disruption. Dillon also pointed out that while NextGens recognise that sustainable business practices are integral to long-term success, more action is needed to fully embed sustainable practices right across their businesses.
COVID-19 was a double-edged sword for NexGen involvement in the family business, with 56% believing that communication between family members about the business increased during the pandemic. However, less than half of respondents, 43%, say they feel more committed to the business than they did prior to the pandemic. The uncertainty created by the pandemic also appears to have made the current generation less likely to relinquish control and more difficult for NextGens to establish themselves. Reluctance of some of the current generation to provide a seat at the table poses a particular challenge for NextGens, according to 57% of those surveyed, with four out of ten saying there is resistance within the business to embrace change.
Mairead Harbron, partner at PwC Private, said that robust succession planning is essential for the family business, particularly as we head into a period of greater uncertainty. The challenge is to build confidence between the current and next generation. PwC’s survey shows communication has increased, and this is the time to flesh out succession plans and to define the leadership skills required to deliver growth in the future. That way, the current generation can transition to a supporting role with greater confidence.
While the current generation of family business owners do see eye to eye with NextGens in a number of areas, there are some notable differences. Both generations are focused on growth, but only half of the current generation believe their business has a responsibility to fight climate change and its consequences, compared to the nearly three-quarters of NextGens. The survey also shows that many family businesses could gain from bringing greater attention to the relative roles of their male and female NextGen members. Far fewer female NextGens surveyed, 43%, are in leadership roles than are the male respondents, 59%.
In addition, 35% of female peers believe their male counterparts are more likely to be expected to run the business. Fewer females, 66%, have a clear idea about their personal ambitions for a future role in the family business compared to male NextGens, 79%. Moreover, for the top-ranked priority area of achieving business growth, just half of females, 53%, say they are actively engaged, compared to 69% of males. Mairead Harbron, partner at PwC Private, concluded that there are some barriers to female leadership in family businesses that come from tradition, such as the first-born son inheriting the business, and while the tide is turning, it is still the case that female leadership participation is lower than male participation at present.
PwC research shows time and time again that diverse businesses create better outcomes including business returns and innovation as well as for customers and attracting and retaining key talent. In this context, greater focus on female participation is crucial for family businesses going forward. Family businesses are a good barometer for the global economy and we are encouraged by the findings of our survey. The NextGens of family businesses see the vital link between growth and Environmental, Social and Governance (ESG). They are ready to learn, adapt and play a larger role in shaping the future for the business and the family. The commitment we see from the NextGen gives us optimism for a future built on sustainable growth.
Michael Lynch, tax partner in KPMG’s Cork office, advises business owners to focus on developing an appropriate succession plan, ensuring they have the right skills to manage succession, grow the business, look after all stakeholders and nurture the next generation. Lynch suggests looking to the talents and skills of the next generation when it comes to appointing leadership roles. At PwC Private, they are growing their business to help their clients grow theirs, with their recent acquisition of boutique tax practice, Twomey Moran, providing clients access to 20 partners, 150+ specialists and more than 150 years of experience and heritage in the Private Business and Private Clients space.