The report found that the pandemic grew the role of the next generation in nearly a third of family firms and that 70 per cent of family business owners intend their offspring to run the business when they retire.
The research was conducted by KPMG Private Enterprise, in partnership with the University of Leeds, and revealed the scale of transformation and challenge since the pandemic is triggering sweeping changes to succession in family businesses.
The commitment to family ownership is steadfast, with more than seven in 10 family business leaders (72 per cent) intending that their children take on the business when they retire. But the succession plans at four in 10 have changed since the pandemic, resulting in more prominent roles for the next generation at nearly a third of family firms (31 per cent).
The research showed a tale of two halves as some family businesses have accelerated succession plans while others have decelerated or even reversed them.
For a third of those whose succession plans changed (30 per cent), the impact is an earlier-than-previously-planned step back from the business by leadership. For four in 10, the next generation have become more involved in management, though not taking over the leadership.
Nearly half (46 per cent) fear that managing succession on top of other risks is too much change at once and have delayed retirement or leaned back into the business.
Mark Essex, director of KPMG’s Family Business team, said succession in family firms has never been such a hot topic.
“Many plans have changed since the pandemic and in different directions. In many cases tech-based change has been the reason for the next gen to step up swiftly as their skills became critical to the success and survival of their businesses,” he said.
“Looking ahead a year or two, given the retirements that were postponed or reversed during the pandemic, we can expect to see another uptick in the next generation taking the reins, due to pent up demand for stepping back by the current generation of leadership.”
The research also found six in 10 family businesses (61 per cent) consider a collapse in consumer demand as a result of the cost-of-living crisis to be their greatest threat, followed by a fifth (22 per cent) citing concerns about input cost rises and other supply chain issues.
The fact that a third of family firms (30 per cent) anticipate their growth to be driven by products developed in the last 12 months is evidence of transformation, which has begun during the pandemic and uncovered by KPMG’s 2021 Mastering a Comeback report that found family businesses were 42 per cent more likely to implement a transformation strategy than non-family businesses.
Further transformation is anticipated in the sector with nearly one in five current family business leaders (18 per cent) expecting their company to be a different enterprise in the longer term, focused on new products or markets.
“The world the next generation of family business leaders inherits is fundamentally different from even three years ago, let alone the time their previous generation took over,” Mr Essex said.
“We see a need to augment lessons passed on by previous leaders with insight from world class academics and peers. Nearly four in 10 family business leaders told us they turn to peers for advice and support.”
Other findings from KPMG’s research include:
- Ninety per cent of family businesses have a member of the ownership family in the management team.
- Seven in 10 (69 per cent) of family businesses have a succession plan.
- The pandemic led 15 per cent of family businesses to seek external talent as they needed skills that were not available in the family.
- Six in 10 family business leaders (61 per cent) expect their company to stay broadly the same in the longer term.
- Thirteen per cent are unsure about their company’s future and can foresee the business closing due to economic challenges.
- Only 7 per cent expect to have to sell the business in the long term due to lack of appetite for running it from the next generation.
- Four in 10 family business leaders (43 per cent) use the other family members in the business as confidants with 37 per cent turning to other family business leaders for support.
- One in five family members have never worked outside family business though on average they work for four years outside before joining the family enterprise.
- On average, family members work in the business for five years before taking a leadership position, but one in 10 become leaders after just one year in the firm.
