When it comes to disruptive forces affecting family businesses most would say digitalisation is the number one disruptor. But that might be short-sighted. In fact, the longevity of the families running these businesses could be a much bigger disruptive force.
People are living longer and the wealthiest are likely to live the longest. That’s according to a new report that says that more than 50% of the wealthy expect to live until their at least 100.
For family businesses, perhaps the most pertinent finding of the UBS report on longevity is the association of health with work. Seventy-seven percent of those polled by the survey agreed with the statement: ”Working as long as possible is good for your health”. And this view was particularly felt among those in Hong Kong and Switzerland, although slightly less so in the UK and the US.
If this ‘working for health’ mentality among the wealthy is combined with expectations of living much longer then these two things will have a profound effect on succession at family businesses. Why step down and hand over to the next generation in your sixties or seventies, or even in your eighties, if you’re going to live another 20 healthy years? And if you’re a next-gen, why stick around until you’re in your sixties or seventies before being able to run the family business?
Everything is pointing towards the 100-year life
Whatever happens to longevity and family businesses it’s probably safe to assume that there will be many more septuagenarians and octogenarians running businesses in the future than there is today. And at one level, that prospect means less pressure on succession for many family businesses, although, of course, it doesn’t solve the succession dilemma at the heart of many companies. It just delays it and creates another set of issues.
Ken McCracken, head of family business consulting at KPMG in the UK, reckons longevity is perhaps the biggest issue for family businesses. Speaking to Family Capitalearlier this year, McCracken said: “Everything is pointing towards the 100-year life,” he says. “The concept of retirement just doesn’t have any meaning anymore.”
McCracken points to how living longer will affect the next generation. “With the 100-year life becoming a reality for many, you’re going to get many members of the next generation saying: ‘I could be in my 70s before I get any chance of running the family business’.” That will lead to a whole other set of issues, said McCracken.
That raises the possibility of skipping a generation altogether and giving the next, next generation the reins of the business instead. Interestingly, a precedent for this could be the British royal family. The current head of state in the UK is Queen Elizabeth II, who, at the age of 92, is the longest living and longest serving British monarch. Her son, Prince Charles, just shy of 70, is her designated successor. But there is some speculation that Charles’s eldest son, Prince William, 35, could succeed his grandmother rather than Charles.
OK, whether this happens or not, remains to be seen. But, if it is touted as a way of bringing fresh and youthful blood into the world’s most famous monarchy, why won’t family businesses embrace the idea as well?
Of course, the other solution is the Bill Gates one – retire early from the main business and pursue another career as a fixer of global problems.
After all the wealthy are increasingly embracing the idea of giving away much of their fortunes while alive. According to the UBS study, 62% say they “will give away more of my wealth while I’m alive”. Why not make a career of it like Gates has done – and in the meantime hand over the running of the business to the next generation before they get too old?