Next gen plan big changes when they take control of their family business

Photo by Thinglass/iStock / Getty Images
Photo by Thinglass/iStock / Getty Images

The next generation of family business leaders are poised to change the companies they will inherit, revamping strategies and governance structures, according to new research. And nearly 40% of these future leaders would consider selling off a part of their business to finance growth.

Professional services group Deloitte found that 80% of next generation’s leaders would pursue a different leadership style compared with the previous generation. If this happens, family businesses might evolve into something completely different in the years ahead, with the role of family ownership potentially becoming less important.

The research reckoned that governance structures are set for the big revamp, with more than half of the respondents saying that they will change the current structures once they have taken over. Only about a quarter expect to keep governance arrangements unchanged. And the biggest area for governance changes, according to the research, would appear to be bringing in more non-family members.

The research comes just a month after a PWC study on the next gen, which found a high level of frustration towards the current strategies being pursued by the current leadership. The lack of a digital strategy was viewed as a particular area of contention between the generations.

Other findings of the Deloitte research were:

  • Innovation was a top priority of next generation leaders with 76% of respondents saying it was among the top three priorities of the business. Although more than 60% of respondents reckon innovation was already a high priority at their family business.
  • Non-financial goals, such as the family character of the business and independence, are extremely important to the next generation.
  • Thirty eight percent of respondents said they would definitely not sell equity in their family business to outsiders to fund growth. Another 25% said they probably wouldn’t. But 37% said they would consider selling equity to fund growth, which suggests a more flexible view to funding growth taking hold among future leaders of family businesses.
  • Only 16% of the respondents say they have a written succession plan, with 64% saying they don’t.

The Deloitte research canvassed the views of 92 next generation representatives from family-owned companies in the Europe, Middle East and Africa region. Most were from small to medium sized family businesses.



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