Meet the future of your family business

Family business

Meet the future of your family business

The four next-gen character types ready to fill the ‘missing middle’

PwC research shows that family businesses often neglect medium-term planning, though the next generation are ready to fill that void. It’s time to get to know tomorrow’s family business leaders, as PwC Partner Ross Nelson explains.

In 2016, PwC’s Family Business Survey outlined the idea of a ‘missing middle’ in most family firms. Absorbed in the now, but also with an eye on the long-term, intergenerational future of their companies, businesses were found to be missing a huge section of their strategy focus – the medium-term part.

“It’s quite natural.” PwC Private Business Partner Ross Nelson begins. “Like many enterprises, family businesses are tasked with being agile and at the forefront of the modern world, forcing them to live in the present and constantly adapt to new business surroundings.

“At the same time, the idea of ‘passing the torch’ through succession planning is a serious task that needs long deliberation and professional development. The strategic gulf that’s left behind is as sizeable as it is significant.”

However, one year later and our 2017 Family Business Survey highlights a fortunate solution, as Ross explains.

“The next generation of family business owners are showing that they align strongly with medium-term strategic thinking and have a solid focus on some of the issues that could affect companies over the coming three to 10 years.”

For instance, 82% of next gens say they think innovation is pivotal to their company’s future success, but only 15% say there is a clear plan currently in place. An even smaller portion, a mere 7%, say their family business has a strategy fit for the digital age.

The next generation have the vision and focus to help plug the missing middle today. So, let’s get to know them a little better.

Who are the next gen?

Our global research into family businesses finds four distinct ways the next generation work within their businesses.

1. The Stewards

Stewards are all about continuing with what’s made the business a success so far, and they stay true to the core conventions their parents – and very often their grandparents – have established.

Around 20% of the next-gen professionals we studied fell into this category. They can be seen as a safe pair of hands in preserving the family business’s legacy and reputation.

2. The Transformers

Those who take on the task of driving significant change in the family firm, we call Transformers. These professionals focus on innovation and reinvention of the family business. They aren’t renegades, however, and aim to get there through both their own talent and with significant support from the current generation.

We found that around 35% of next-gen professionals are Transformers. They’re enterprising, and should be given the backing to experiment with their ideas – and even fail on occasion – to learn what works.

3. The Intrapreneurs

While Transformers seek to overhaul the entire business, Intrapreneurs take a different tack, carving out a specific venture within the family firm. It’s not the same as taking on a business function or division; these next-gen professionals seek to develop something new of their own within the company structure – a spinoff brand or a way of selling to new audiences, for instance. The result may look and feel like a start-up, with its own culture and way of working, but essentially has the security of family support and funding.

Around 20% of our surveyed professionals are Intrepreneurial, and can benefit from using the core values and components of the family business while changing enough to make their new venture unique and fresh.

4. The Entrepreneurs

At one point, every family business has started with an entrepreneur. For many next-gen professionals, that spirit and drive to start something new has been passed on from their parents or grandparents, meaning they seek to start an independent venture of their own.

Entrepreneurs make up 25% of our surveyed next-gen demographic, and are occasionally the youngest of the family. Whether they ultimately come back to the family business with new experiences or not, current-generation leaders tend to offer their unwavering support (financially or otherwise) and see it as a different kind of success – something to be celebrated and encouraged.

Nurturing the next gen

Our research showed that next-gen professionals can sometimes be a mixture of these character types – for instance, Stewards in the way they preserve core business values, but Intrapreneurs in setting up their own independent ventures.

However, Ross says that there’s one constant between all four types is their need for support.

“It’s the job of the current generation to understand what drives the next group of family business leaders, and then take steps to make it easier for them to live up to their potential.

“The facts show that there’s a serious commercial need to nurture the next generation today, particularly if family firms are to plug their missing middle.”

Successful succession – five key tips

  1. Gain a deep appreciation and understanding of the aspirations of each family member.
  2. Hold regular family meetings and communicate openly.
  3. Create a strategic plan for the short, medium and long-term success of both the company and the family.
  4. Gain a shared understanding of the family values and vision, and map out how they align with those of the business.
  5. Build an appreciation of the responsibilities and roles that come with the family business, including how these will change between generations.

Want to know more?