Growth is the lifeblood of any family business as it is essential to ensuring the business will continue to prosper for future generations. For the next generation of family business leaders, growth and sustainability go hand-in-hand.
In new research from PwC Africa, our 2022 edition of the NextGen Survey reflects the extraordinary times we’re living through. From the Covid-19 pandemic testing companies around the world, to a myriad of other challenges including electricity scarcity, a skills shortage, geopolitical uncertainty and technological advances, the capabilities of family businesses will need to evolve to ensure they can continue rising to meet these challenges and prosper.
The latest NextGen Survey has been the most extensive that PwC has ever conducted of the next generation of family business leaders, with over 120 members of these businesses speaking to us about their challenges, concerns and long term outlook.
The survey shows how the pandemic has united various generations around a common goal: driving growth to secure the stability of the business and family.
Schalk Barnard, PwC Africa family business leader, says: “The business landscape is shifting rapidly, and the responsibility and challenges future leaders face are complex. Business as usual isn’t an option in a world characterised by economic disruption, pervasive uncertainty and climate change.
“Business leaders understand this and need to acknowledge the vital link between Environmental, Social and Governance (ESG) concerns and growth.”
How acting on ESG can build trust for your business
Barnard says family businesses can and should lead the way on ESG. To achieve this, business leaders need to win the trust of the current generation while challenging the status quo.
The survey shows that the most significant divergence on priorities of different generations is on the topic of sustainability and supporting local communities — which appears to be more of a focus for the next generation than for senior generations.
Sixty-nine percent (69%) of survey respondents believe there’s an opportunity for family businesses to lead the way in sustainable business practices and 66% believe sustainability is at the heart of everything businesses do.
Although 47% of respondents have a developed and communicated sustainability strategy, PwC believes these plans need to be sped up. Research shows that in recent years, publicly listed corporations that prioritise ESG and have better ESG risk ratings, compared to family businesses, have begun to outperform family businesses in terms of market capitalisation.
Andrea Benkenstein, PwC Africa family business specialist, says: “These results indicate that family businesses are losing their trust premium. As ESG climbed up the investor agenda, family businesses lagged behind, and investors took note.
“According to the 2022 Edelman Trust Barometer, 67% of respondents however still said they trusted family businesses — against 56% for public companies — making family businesses still the most trusted type of enterprise.”
Securing the family’s future
The survey shows how the pandemic has brought family business generations together. Respondents say it strengthened cohesion, communication between generations, accelerated succession planning and has united everyone towards a common goal: to drive business growth. Fifty-seven (57%) percent of respondents say they now feel more committed to the business than they did before the pandemic.
NextGens proving themselves
PwC found that current senior generations are firmly trying to maintain control, while 30% of NextGens are expressing difficulty at trying to prove themselves as a new leader or board member. The survey indicates that 16% of NextGens say they had been given a project during the pandemic they may not have been asked to lead before, while 61% see the current generation’s hesitance to retire as a problem.
Exactly half (50%) of respondents say their family businesses have a succession plan in place.
Benkenstein says: “Owners need to feel confident that the business is in safe hands, and future leaders need to provide reassurance that they understand the challenges and have the skills to protect and grow the business. The good news is that the pandemic focused the minds of family businesses on succession planning.”
Barnard says an honest generational contract that communicates expectations on both sides is needed to inspire confidence. Once clearer communication between generations is achieved, and better succession planning is in place, it will be time to work out the details, like what leadership skills and experience is required to allow the business to thrive; what will deliver growth in the future; and what are the stages and landmarks on the route to succession?
Challenging the status quo and becoming the leader your family business needs
The world is changing and the business techniques of the past will no longer be enough. NextGens need to earn the right to challenge the status quo and discover growth opportunities to ensure family legacies continue. It takes what we call a community of solvers: people coming together with different skills to deliver success.
Barnard says: “We believe that a business-as-usual approach won’t be enough. As leaders-in-waiting, NextGens will have to develop their own blueprint for success. They’ll find themselves pushing boundaries and challenging years of established thinking.
“This is a watershed moment which requires the next generation of leaders to reimagine what success means to them. They have the foresight to lead the way. It’s up to them to become the leaders their businesses need. They need to be themselves, be different and drive change.”