Family businesses face challenges in the digital age
With times and technologies changing fast, young managers taking over family businesses are confronted with generational gaps and culture change, an international PwC research study shows.
PwC conducted in-depth conversations with 35 next generation leaders from 21 countries and polled more than 100 additional next gens for its new report, Same passion, different paths: How the next generation of family business leaders are making their mark.
“Our research shows that digital is one area where the generation gap can be a real positive. While next gens are excited to tackle digital, the current generation is often more cautious to embrace the proposed pace of change,” said Dr. György Antall, Partner of Réti, Antall & Partners PwC Legal in a press release sent to Budapest Business Journal.
Among the next generation of family business leaders, three out of every four have big plans to take their business forward. However, generational challenges persist, largely in the areas of digital and innovation.
In today’s business landscape, all firms – family businesses or otherwise – need to address the digital challenge, and next gens seem to grasp this. Three quarters of those polled believe it’s very important or essential to have a strategy fit for a digital age.
As “digital natives”, they feel much more comfortable with digital technology and see its potential for change. That said, only 7% of respondents believe their firm is currently doing this well.
Partly due to a greater degree of transformation and investment needed to effect digital change, many current generation leaders may be cautious about committing to it. About a third of next gens polled (36%) expressed frustration that the current generation does not fully understand the potential for digital and the risks it could pose.
Likewise, the vast majority of next gens see innovation as a core component, with 82% responding that innovation is very important or essential to business success. However, a mere 15% of those polled see innovation being implemented well at their firms.
While next gens will take their family firms down different paths, a set of common success factors emerged from the research. Regardless of the chosen path, these “five Cs” comprise guiding principles for all family businesses.
Culture – The family firm should foster a “safe place” for the next gen to explore and grow.
Communication – Genuine two-way engagement between the current and next generation, based on mutual respect and trust, ensures that experience is properly valued and new ideas are appreciated.
Clarity – It is vital to have a clear strategy and agreed demarcation of roles and responsibilities—particularly where colleagues are also relations and emotions are always in play.
Credibility – As the “boss’s child” a next gen needs to earn the respect of co-workers, possibly gaining experience outside the family firm first.
Commitment – The business needs to make a long-term commitment to the development of the next generation, but the next gens should also reciprocate with a willingness to invest time in the business and give it a chance to work.
“Sustainable success in the world of family business depends on give and take, and the ability to balance the needs of firm and family – next gen and current gen. If any of these pieces are missing or misfiring, the succession process becomes a risk not an opportunity,” Antall warns.
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