Worldwide: Next Generation Family Business Leaders Chart A Different Course

Last Updated: 5 September 2016
Article by Deloitte LLP

14 June, 2016 – A new generation of young, highly motivated and mostly well-educated men and women is ready to take over leadership of their family businesses, according to Deloitte's latest report conducted across the Europe, Middle East and Africa region entitled "Next-generation family businesses Evolution, keeping family values alive." They are resolute and ready to face the challenges ahead in order to maintain the family character of the business and keep the family values alive. They want to grow the company in a rapidly changing economic and business environment, and to retain independence of ownership, though 40% of respondents do not rule out the possibility of external investors.

The new Deloitte survey was conducted across the Europe, Middle East and Africa region and its findings are not region specific. "This is extremely refreshing; it suggests that we are aligned across the world and that the next generation will have their international counterparts to work with and build the future." explains Walid Chiniara, partner and Deloitte Private Leader in the Middle East.

According to the report, the next generation family business leaders intend to make changes when they take over. 80 percent say that their leadership style will be different compared to the previous generation, 56 percent will change the family company's strategy, 56 percent will change corporate governance structures, and 51 percent intend to take more risks than their predecessors did, but in a more controlled way.

"In this light, it is a positive sign that a healthy 32 percent of next generation leaders confirm having been groomed to take on leadership roles since their early childhood years. However, it remains that 64 percent still do not have a written succession plan in place," commented Chiniara. "That being said, it must be noted that the number of family businesses that have written succession plans in place has increased dramatically (16 percent) from a decade ago."

Other key findings of the report include:

  • Innovation and risk. Contrary to the common view, family businesses are not risk-averse and are willing to innovate, with innovation being a top 3 priority for 76 percent of respondents. The challenge for the next generation, however, is to convince their family members of the importance of innovation. According to the report, 61 percent of the previous generation of family members are well aware of the need for innovation, out of which only 40 percent are willing to take on the associated risk.
  • Ownership and control. Although more than 50 percent next generation leaders expect to change the governance structures within their businesses, maintaining business ownership and control within the family remains a top priority. Reasons attributed for the need to change governance arrangements include amongst others, the need to bring in knowledge and experience from non-family members suggesting an openness to invite non-family members to join the board of directors.
  • Key investment areas. The investment areas over the next five years for the next generation of family businesses include the following: Expansion, whether in geographical markets or in products and services; Innovation and research & development; and Accelerated use of new technology in the business.

"The next generation of family members are the future of our economy, and our findings show that we have good reason to be optimistic and upbeat," concluded Chiniara.

About the NextGen Survey

The EMEA Next Generation Survey 2016 is an initiative of Deloitte. Between January and April 2016, 92 in-depth and face-to-face interviews were conducted in 19 countries in EMEA region.

To view the full report please visit the following link: http://bit.ly/25Unvio

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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