A recent report released by Deloitte Private reveals how different generations of family businesses approach leadership, risks and decision-making. Notably, 63% of respondents cited “interest in succession” as a high or very high risk to their organization’s succession planning, exemplifying how this crucial aspect of family businesses is not rising to the top of leaders’ agendas.
The survey shows diverging perspectives on key elements of family enterprises:
When asked whether their family business could withstand the departure of an important family employee, 24% of the current generation surveyed strongly agreed their succession plan would allow the business to continue running smoothly. However, only 13% of next generation respondents strongly agreed, revealing a gap for companies to focus on closing.
Current generation respondents reported higher concerns around the ability to hire and retain employees (23% vs. 11%), the impact of climate change on business organizations (20% vs. 12%), and capital structure (24% vs. 16%). This may be attributed to differences in experiences, as half of the current generation employees (48%) have only ever worked in the family business, compared to just 29% of the next generation.
Members of the current generation were almost twice as likely as the next generation to say the successive generation has a very high level of participation in decision-making and direction of the enterprise (28% vs. 15%). The disconnect grows more pronounced when examining plans for the business. When asked about plans to retain or divest ownership in the company, just 8% of the current generation expect successors to sell part or all their interest in the business, while 18% of next-generation respondents say they expect to do the same.
“Understanding the gaps in perception between generations is critical to a family business’ success in the long-term,” said Wendy Diamond, Deloitte Private U.S. family enterprise leader and partner, Deloitte Tax LLP. “Their governance structures can be valuable as they work to prioritize transparent communications, education for the next generation, succession planning, and innovation to keep their organizations competitive and thriving.”
Despite their divergent views, both generations surveyed recognize the importance of technology as a core competency for potential successors. When asked which competencies were important for a successor to possess, 46% of the current generation and 46% of the next generation chose technology and digital transformation.
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Source: 2024 Family Enterprise Survey
