Search Stories by: 

Industry News, HR, News

Over 60 per cent of incumbent leaders of family businesses are concerned about passing the baton
Over 60 per cent of incumbent leaders of family businesses are concerned about passing the baton

Family businesses reticent to pass baton

The heads of family businesses are stressed about succession, with many incumbents deeply concerned about their children’s ability to take over after they retire.
According to a survey of 700 businesses by KPMG and Family Business Australia, 57 per cent of respondents were “concerned about the motives of their potential successor”, while 63 per cent were worried about their abilities.

“I’m asked when I’m going to let go. Well, I’m not going to let go, not until you have a good grip on the baton and are running with it. Even then I might not let go because you might drop it,” said one participant during the study. “This business you’re talking about is my baby. I created it and it’s the wealth of this family and the security of this family going forward. I’m not just going to hand it over and walk away and let you destroy it, or let you run off and do your own thing and forget everything you’ve been told.”

Despite the concerns of incumbent business leaders about handing over the reins, 62 per cent of survey respondents insisted maintaining control of the family business was their highest priority. Twenty-four percent of businesses expected to hand over the company to the younger generation within the next five years.

Despite family businesses’ impact on the Australian economy, the sector remains little understood. KPMG’s analysis of the reasons behind the older generation’s reticence about the younger is complex.

“A sense of stewardship does not disappear simply because an incumbent reaches an acceptable retirement age, or the next generation is ready to take control,” said Bill Noye, head of KPMG’s Family Business practice.  “This survey, exploring current thinking of family entrepreneurs, is highlighting that the motivations for succession are often impacted by the ambiguous nature of relationship with children and other family members.”

Family business leaders’ conception of “controlling” a business is motivated as much by family values as competitive advantage, which allows organisations to exert more influence over their culture and management.

“Our survey has found that control in a family business is often aligned to a sustained competitive advantage. This grows from a personalisation of relationship, financial flexibility and resilience, and superior service quality and innovation,” said Philippa Taylor, CEO of Family Business Australia. “The typical family business is more likely to accept a prolonged period of low or negative returns in order to execute their strategies.”

While succession and longer-term strategy were clearly of serious concern to family businesses, only 23 per cent co-ordinate any kind of independent review of their management team. However, 39 per cent of companies have instituted a formal board of directors, while 31 per cent run a family council. Mismanagement of the succession process, KPMG found, was the single most likely cause of conflict within the family.

"Succession should not be an event, it needs to be a process. It means the people who are prepared to take over have been so for a while,” Taylor told SmartCompany. “One of the reasons we find that family run businesses have a better return on investment is that they have a good culture."

Sources: KPMG/Family Business Australia, SmartCompany

enewsletter banner 1

Friday, 20 September, 2019 5:57pm
login to my account
Username: Password:
Skyscraper 2
Free Sign Up

Receive FREE newsletter and alerts

Display 1
Skyscraper 1