Perhaps it is unsurprising that a study – carried out at the start of this year – into the view of different generations of family business dynasties shows a lack of ironclad consensus. But such divergences are nothing new, and the role of smart wealth/business advisors is to help clients handle them.

The $7.7 trillion US family business sector employs 83.3 million people across 32 million firms. Survey evidence showing that older and younger generations don’t closely agree on how firms should be run carry large implications for future wealth creation and transfer.

According to a new report from Deloitte Private, based on 500 current and next-generation family members, members of the current generation were almost twice as likely as the next one to say that the successive generation takes part in reaching decisions at a “high level” (28 per cent vs 15 per cent). In smaller businesses – less than $500 million in revenues – only 7 per cent of the next generation believe that they have a very high level of participation in the direction of the enterprise.

These wide gaps of perception and reality, and differences of opinion on topics such as succession, run like a thread throughout the 2024 Family Enterprise Survey, issued a few days ago.

Some 8 per cent of the current generation expect successors to sell; 18 per cent of next-gen expect to do the same, the report said. 

Some 28 per cent expect that the next generation of family members will take charge within five years, and another 47 per cent expect the transfer to occur within the next six to nine years. Also, 46 per cent of next-gen survey participants expect to have leadership, C-suite, or executive-level roles in the business within five years. 

There are many studies and insights these days about business transfer, different perspectives on business, the challenges of taking over a family firm, and more. This report goes way beyond topics such as trust and estate planning, tax and control. A number of major private banks, such as at Bank of America, Wells Fargo, JP Morgan, Citigroup and UBS, devote resources to working with HNW and UHNW families on these topics. The desire to create structures through which families can hammer out agreements also partly explains the vigor of the North America family offices sector.

Mind the gap
The biggest divergence found by the survey concerned harnessing data to deliver insights and generate revenue, where 27 per cent of the current generation and only 17 per cent of the next generation strongly agreed that their family business excels in this area. 

There are other gaps in whether the company is working to improve cybersecurity (29 per cent of the current generation vs. 22 per cent of the next generation) and whether digital transformation is continuing to significantly accelerate and remain a top priority at the business (32 per cent current vs. 26 per cent next gen), it said. 

When asked about the important competencies for a successor, 46 per cent of the current generation selected technology and digital transformation, which was the most common response. When asked to identify their core competencies, 46 per cent of the next-gen respondents also chose technology and digital transformation.

Risks
Survey respondents from the current generation perceive higher risks to business growth than the next generation in the ability to hire and retain employees (23 per cent vs. 11 per cent), impact of climate change on business operations (20 per cent vs. 12 per cent), and the capital structure of the organization (24 per cent vs. 16 per cent).

When asked if “the family-owned business would continue to run smoothly and without interruption if an important family employee moved on, retired, or passed away because we have a formal succession plan,” 24 per cent of the current generation strongly agreed compared with only 13 per cent of the next generation.

Some 31 per cent of the current-generation survey respondents strongly agree that they are confident with their business alliances and partnerships, but just 22 per cent of next-gen respondents strongly agree with this sentiment.

In other findings, respondents indicated that while about half of current-gen employees (48 per cent) had only ever worked at the family business, just 29 per cent of next-gen employees did.  

Views in common
For all the differences, there are points of unity. An overwhelming majority of respondents from both generations (90 per cent of the next generation and 89 per cent of the current generation) agree that next-gen family members working in the business are contributing to the furtherance of the business legacy and purpose.

Survey respondents included leaders and employees from the consumer goods; consumer services; energy, resources, and industrials; financial services; life sciences and healthcare; and technology, media, and telecommunications industries. All responses came from family-owned, private companies with revenues of $250 million to more than $1 billion.