Five key strategies to prepare the next generation: Family Enterprise Foundation
OAKVILLE, ON, June 15, 2023 /CNW/ – With the great wealth transfer and transition of family businesses now underway, bridging generational divides, preparing successors and building emotional connections are keys to a smooth succession, finds new research by Family Enterprise Foundation (FEF).
In its latest report, Preparing the Next Generation: A Family Business Roadmap, FEF conducted a deep dive into the perspectives of the next generation of family business members to identify strategies to help all generations be more aligned when transitioning business ownership and management. This research aimed to identify barriers to a successful transition and how business families can better prepare their next generation successors.
“Given that ownership of more than 60 per cent of family enterprises is expected to be handed off within the next decade, this is a crucial moment for the generations on each side of the transition. Much is at stake, not only for the family business but for the family’s wealth, reputation, legacy and family harmony… not to mention for the national economy” says Bill Brushett, President and CEO, Family Enterprise Foundation.
When family business owners consider their succession journey and the future of their business, often the focus is exclusively on finances and tangible assets. However, previous FEF research revealed that next generation preparedness is the primary cause of concern in intergenerational succession. So, while financial considerations should always remain a part of the larger picture, the future of a family’s legacy lies in its human capital and the effective preparation of the next generation.
In-depth interviews with next generation family business members identified five practical strategies to help both generations prepare for the transition process:
- Foster early involvement and emotional connectedness: Nurture strong emotional bonds to the family business through early exposure and involvement, which helps to measure and to build interest.
- Train and prepare: Create a comprehensive training and preparation program for the next generation. The program should feature both formal and informal learning structures and may involve experience gained outside the business.
- Encourage mentorship and peer interactions: Encourage peer interactions and mentorship to provide the next generation with a robust network to learn from and lean on throughout their career. Surprisingly, nearly all study participants received guidance from a mentor.
- Find the right role: Rotational programs are an effective way to help next gens find the right role in the business. However, most respondents believe the next generation should not be forced or expected to play a role in the business. They should only be involved if they are fully aware of the responsibilities of ownership and are passionate about the opportunity.
- Involve trusted advisors: External advisors are cited by participants as among the most desired and beneficial supports for family enterprises. Involve advisors who are specifically trained to work with business families to help maintain harmony by opening communication and improving transparency.
“This research drove home the vital importance of early preparation and frequent, two-way communications to the succession process and family business longevity. Both generations working together to chart a path forward will ensure the family is best positioned to manage the stressors of the transition and enable the business and family legacy to thrive over the long-term,” says Richa Arora, Family Enterprise Advisor (FEA), Practice Leader, Family Dynamics and Governance, KPMG Family Office, KPMG in Canada.
For this survey, Abacus Data conducted 25 in-depth interviews from September 6 to November 29, 2022 with adult Canadians from the next generation, who are either involved or not involved in their family’s business. This report was prepared by Family Enterprise Foundation and is supported by KPMG Family Office, KPMG in Canada.
This research built on two earlier quantitative studies by Family Enterprise Foundation on Canadian Family Business Transition Intentions, “Ready, Willing and Interested or NOT?” ( 2021) and “Who are the Guardians of Family Legacy?” (2022).
Family Enterprise Foundation is the charitable foundation of Family Enterprise Canada. As the unified voice of family enterprise in Canada, the Foundation focuses on developing educational resources, conducting research, building a strong and connected network and promoting the success and sustainability of entrepreneurial families and their enterprises to ensure intergenerational longevity. To learn more, please visit FamilyEnterpriseFoundation.org.
KPMG Family Office works with private business clients, family offices, and successful individuals and families to define and achieve their evolving objectives, giving them clarity, stability, and peace of mind as they navigate the complexities of wealth with confidence. Our approach is based on an unwavering commitment that is cultivated through deep-rooted relationships, trust, integrity and shared values. We assemble a diverse and forward-looking team that is designed specifically for them, and able to look at their unique needs. To learn more, please visit kpmg.com/ca/familyoffice .
SOURCE Family Enterprise Foundation
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