According to PwC’s Family Business Survey, 62 percent of family business owners expect to pass the baton to the next generation. But many businesses lose their way when making the transition from startup to a more structured, complex organization.
Despite solid intentions, only one-third of family businesses are expected to last beyond the founders’ generation while even less—an estimated 12 percent—will make it through the second generation to a third.
A confluence of factors make succession planning more urgent. The enormous baby boomer generation will retire en masse by the end of this decade. But according to the PwC research, over half of family businesses are unprepared for the transition to the next generation.
Prior to this year, many companies’ succession plans were likely informal. Even if junior family members wanted to be involved in the business, PwC found that about half weren’t trained to take on senior roles, which include responsibilities such as executive decision-making and long-term planning. However, the pandemic has forced many organizations to acknowledge the vulnerability of their senior owners and to take steps to adapt to this disruption as well as whatever comes next.
Senior owners and their presumptive junior successors may look at the prospect of a leadership shift differently depending on their individual situations and aspirations.
Senior Leaders Feel the Time Is Right
Given the amount of pivoting that's required of business owners as a result of this year's disruptions, some tenured leaders are considering handing the reins to younger family members who are better equipped to try new innovations, riskier technology and practices and fresh marketing approaches.
For Konrad Goess-Saurau, the founder of car equipment manufacturer AutoBead, timing was everything.
“When we moved our family from Austria to England and opened for business in a new country, I recognized the importance of brand awareness,” Goess-Saurau says.
“I don’t fully understand today’s digital channels, but my son Markus does," he continues. "For example, he implemented automated marketing and data analysis that allows us to anticipate a customer’s next purchase and prompt them with relevant communication. I thought, why fight it? Let’s hand the business to the person with the best chance of success.”
The pandemic led Sophie Bowman and her business partner Jackie Nepola, to think more intently about the future of their PR firm Brand Branding.
“We always planned to have a next-gen division, but we fast tracked launching it when the pandemic hit. We have delegated graphic design and content creation to my partner’s teen daughters,” Bowman says.
“Not only can the teens close deals because they relate to consumers that brands struggle to reach," she says, "but this approach also gives younger family members a career at a time when there’s no guaranteed job security in someone else’s company.”
Timing also played a role in the leadership transition of the architectural firm Metzger Mandl from father to son.
“My partner died of pancreatic cancer at age 52. David ran the business, while I brought in the work and led the design responsibilities of the firm,” explains founder Marvin Metzger.
“While I struggled to keep everything going, my son Eli got his architecture license and was honing his craft with other respected firms," he says. "He took over running the practice in a way that kept up our level of excellence in the area of multifamily housing in New York City.”
For the rest of the piece, head over to the AMEX Business site.
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