Today’s youth has a completely different take on business and lifestyle compared to the previous generation; so there exists a huge generation, credibility and communication gaps.
Despite all this, more than 50% of the next generation is hoping to manage their family business in the future, according to a report, titled Succession planning - family, legacy and you, by professional services firm PwC India. PwC surveyed 147 individuals in India and 2,939 people globally for the report.
“Clearly the starting point is to protect and grow family wealth as a generation change happens. Beyond this, we have seen that the youth are increasingly driven by the need for greater empowerment and purpose and hence have entrepreneurial leanings,” said Gaurav Lahiri, partner, Deloitte India, a professional services network.
This, however, is in stark contrast to how the senior generation expects to pass on their business. Only 35% of the current family business leaders plan to pass on the management to the next generation. Most leaders want to bring in professional management and 48% want to pass on only the ownership to the next generation.
“It is very important to have faith in the younger generation who is fully equipped to handle their exposure to world-class business environment and practices which help them to perform better in real business situations,” said Seema Mahajan, director, NMIMS - Pravin Dalal School of Entrepreneurship and Family Business Management. “It just happens that at times the senior generation does not allow them to take the risk and hence does not see them perform.”
Despite all the efforts, ambition and positive outlook, only 12% family businesses make it to the third generation and as low as 3% make it to the fourth. “The fact remains that our family-run businesses do not scale up, they are content with their local, regional markets and do not spend too much on R&D, and design thinking,” added Mahajan. Family businesses today are facing dual challenges. On the exterior is the very competitive global economic environment, internally, the challenge of dealing with issues of managing the transition of the family business into the next generation, said the report.
Risk-taking ability between the current and the next generation lies at two extreme ends of the spectrum. Nearly 20% of the next generation feels that their vision is very different from the current generation. The next generation is more aggressive and open to new ideas, said the report.
The current generation needs to be willing to give up their positions and open doors for young talent. The next generation to needs to pull up its socks. They need to be more focused, responsible and take an active interest in the management process instead of aiming only at end profits. “A strong business acumen and problem-solving skills will take the next generation a long way. Being emotionally attuned and authentic in their leadership style is equally important,” said Lahiri.