Can family businesses bridge the generational gap? The First Bank Center for Family-Owned Businesses 2023 Family Business Survey aims to answer that question and more. With the assistance of market research firm MacKenzie Corporation, the Center’s inaugural survey explores multigenerational issues affecting family firms, with a focus on long-term strategies and succession planning.
The survey’s 552 participants are a cross-section of first-to-fifth-generation family businesses in the United States representing all industries and regions. The answers provided by these business-owning families suggest that the pandemic and a growing generational divergence are impacting family firms and the challenges they typically face.
What’s Driving Leadership?
As family businesses move past the context of their founding, generational differences can create unique governance and performance challenges. According to the survey’s findings, generational gaps exist in areas as fundamental as the motivation for starting a business. First-generation respondents place self-sufficiency and passion at the top of their reasons for starting the family business, but subsequent generations cite entrepreneurship and family support as their primary motivators.
Contributing to their families is a recurring theme for second gen-and-beyond family members. 42 per cent said that continuing the family legacy was the reason they joined the family business. Of these subsequent generations, 22 per cent were asked to join the family business, 15 per cent joined because they needed a job, 11 per cent needed to fill a role in the business and 10 per cent indicated that it was always their plan to join the family enterprise.
A Divide on Strategies
The results from First Bank Center’s Family Business Survey further emphasise the generational split in attitudes toward business strategies. Next-gen family members see their business strategies changing, with significant differences connected to Corporate Social Responsibility and Research & Development Investments. Moreover, employee engagement and satisfaction were more important among second-gen-plus family business respondents, with 30 per cent indicating it was a top priority compared to 20 per cent of first-gen business family members.
The 2023 study also found that 52 per cent of its respondents saw “Understanding Customer Wants & Needs” as the top priority for family businesses today. However, only 7 per cent saw the importance of “Customer Journey Mapping” to improve the customer experience, placing that tool last on the list of customer-centric considerations.
Differing Succession Perspectives
Despite the accelerating transfer of wealth from baby boomers to their children and grandchildren, only 27 per cent of the survey’s first-generation family business owners felt their business would change hands in the next 10 years. In contrast, 47 per cent of next-generation business owners and family members believed that ownership of their businesses would pass to a future generation during the same period.
Succession planning is critical for the long-term success and continuity of family businesses. However, the activity can present challenges for many family firms. The survey’s findings suggest complications generated by COVID-19 intensified the process for some families, with 37 per cent of them indicating their succession planning efforts were interrupted because of the global pandemic.
The survey found that 73 per cent of its respondents already have, or intend to develop, a structured succession plan. However, there was an equal split among families, with 50 per cent planning to seek outside support in developing their succession strategy and 50 per cent planning to keep the process internal. In either case, 28 per cent of survey respondents felt family dynamics and relationships were more significant when considering their family’s legacy than business assets and tangible benefits.
A Journey in Transition
The First Bank Center for Family-Owned Businesses’ survey gives insight into the growing divisions between America’s first-generation and next-generation business owners around several important issues. However, the survey also highlights the awareness family firms have toward shifting market trends and the connection between entrepreneurship and longevity.