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Release: Millennial CEOs are ready to take over, according to STEP 2019 Global Family Business Survey
70% of global family businesses do not have a formal succession plan
But Millennial CEOs are ready to take over, according to STEP 2019 Global Family Business Survey
More than half of global family CEOs do not have a formal retirement plan and 70% of global family businesses do not have a formal succession plan, according to the 2019 STEP Global Family Business Survey, The impact of changing demographics on family business succession planning and governance. However, the report finds that Millennial CEOs are ready to take over.
“With over 1,800+ family business leaders from all over the world sharing their views on increasing demographic and societal changes, the STEP 2019 Global Family Business Survey shows that family businesses in different parts of the world are exposed to new challenges that make traditional methods of succession and governance no longer appropriate. The main findings suggest that looking at the demographic cohorts of global family business leaders helps shed light on differences in generational outlook and on how family businesses are dealing with the challenges associated with succession and governance in the modern era. Overseeing, understanding and managing such challenges is critical to the sustainability of the global family business model”, said STEP Global Academic Director, Andrea Calabrò.
“We’ve been studying entrepreneurship and succession trends across European family businesses for over the last eight years. Our research shows that family businesses are experts in long term survival — and they know this depends on their ability to innovate and adapt to a rapidly changing business environment. When it comes to succession, we’ve also found that leaders appear to be staying involved in the business well into their 70s. While they may not always play the role as the direct decision maker – they may take on an ambassador role, contributing their skills to maintaining important relationships and protecting the value of the business. We are extremely pleased to be partnering with the STEP Project to help advance global research that takes a deep dive on the trends that are impacting succession and governance practices for business families around the world and contributing to insights on what a model for the future might look like. This is an area that we, at KPMG Enterprise are extremely passionate about”, said Jonathan Lavender, Global Chairman, KPMG Enterprise and Global Co-leader, KPMG Enterprise, Family Business, KPMG International.
The 2019 STEP Global Family Business Survey Report is co-authored by Andrea Calabrò, (STEP Global Academic Director & IPAG Family Business Institute, IPAG Business School) and Alfredo Valentino (STEP Global Research Champion & ESCE International Business School).
Key Findings and Recommendations
- Millennials family business leaders (39%) have the highest level of education
- Belonging to a more recent demographic cohort is related to lower CEO tenure
- Millennials family CEOs plan to retire before their fiftieth birthday
- Family firms led by CEOs from ‘Generation X’ and ‘Millennials’ perform better
Recommendation: Millennial CEOs are ready to take over!
Millennials family business leaders are highly educated, with higher care for work / life balance, planning to retire before their fiftieth and leading their firms more successfully. Current family business leaders who are thinking about changing at the top should not forget this.
- Global family CEOs plan to retire between the age of 61-70
- More than half of global family CEOs do not have a formal retirement plan
- More than 1/3 of global family CEOs after retirement plan to not spend time in business activities
Recommendation: CEO Retirement plan wanted
There is a need for family businesses globally to implement CEO retirement plans. Family CEOs are still retiring too late but despite of this after their retirement they plan to not be further involved in the business.
- 70% of global family businesses do not have a formal succession plan
- Successors’ self-commitment and competence are the criteria the select the next CEO
- 47% of global family businesses have a succession plan in case of unexpected events
- 45% of global family business leaders states that ownership will stay in family hands
- ‘Generation X’ and ‘Millennials’ CEOs do not see that the next CEO should be from the family
Recommendation: Planning more is better
Selecting the next CEO based on criteria such as successors’ commitment and successors’ competence and having a plan in case of unexpected events is only a necessary but not sufficient condition to secure the long-term sustainability of family businesses. It is necessary that family businesses globally take into account that the next leaders will be Millennials and implement formal succession plans resulting from a process taking into account business, family needs, and the Millennials’ perspective.
Family governance and corporate governance
- There is a perceived need of change of their existing family governance tools
- To increase the sense of family members’ identification with the firm it is important to use more than one family governance tool.
- Family businesses which adopt more than one family governance tool compared to the ones which adopt only one show also higher levels of entrepreneurial orientation and firm performance.
- Family businesses which adopt three or four corporate governance tools in comparison to the ones which adopt only one tool show higher levels of entrepreneurial orientation and performance
Recommendation: Family governance does matter
There is a perceived need of change of family businesses’ existing family governance structures. Family businesses wanting to strengthen family members’ identification with the firm need to implement more than one family governance tool. Moreover, adopting more than one family governance tool leads to higher degrees of entrepreneurial orientation and firm performance.
Effect of gender and societal change
- Female family business leaders plan to retire at a younger age than their male counterpart
- Decisions and succession take place earlier if the next senior family business leader is female
- Family businesses with female CEOs have less autocratic leadership than male CEOs
Recommendation: More female CEOs are needed and beneficial
Letting more female CEOs take the stage in the family businesses is needed globally and will benefit the family businesses as they will have less autocratic leadership styles than male CEOs, plan to retire earlier, increase the likelihood to have more female CEOs in the future and anticipate the time of succession.
Entrepreneurial orientation, performance and main concerns
- Availability of talent is the main concern of family business leaders globally
- Family businesses which are led by leaders belonging to Generation X and Millennials have higher level of firm performance than family businesses led by older demographic cohorts
Recommendation: Millennial CEOs perform better but more Talent is needed
It is time to ‘pass the baton’ to Millennial CEOs to boost family business performance. Moreover, to sustain competitiveness it is also important to continuously look for talent and family businesses globally should reflect on how to increase and strengthen their employer branding.
About the Report
With people living longer, increasing demographics and societal changes, family businesses in different parts of the world are exposed to new challenges which make their traditional methods of succession and governance no longer been appropriate.
This report based on the STEP (Successful Transgenerational Entrepreneurship Practices) 2019 Global Family Business Survey addresses the above mentioned challenge by answering the following questions: how do changed demographics impact family business succession and governance? Do CEOs belonging to younger demographic cohorts such as ‘Millennials’ have different managerial and leadership style? How are family business leaders planning their personal retirement plans and the company succession plan? Which are the differences across cultures?
With over 1,800+ family business leaders from all over the world sharing their views on changing demographics and how they impact the family business governance, succession, entrepreneurial orientation and performance this report aims at fostering debate and reflections on family businesses in different parts of the world.
Family business leaders have been responding in 18 languages, from 33 countries and across 5 world regions (Europe & Central Asia, North America, Latin America & Caribbean, Asia & Pacific, and Middle East & Africa).
Forty-eight affiliated universities from different parts of the world contributed to this study. Their dedication and collective effort has made this project report a reality thanks to their passion for family business.
The STEP Project is sponsored by the KPMG Enterprise Center of Excellence for Family Business
About Successful Transgenerational Entrepreneurship Practices (STEP) Project
Founded in 2005 by Babson College in collaboration with six academic affiliates in Europe, the STEP Project is a global applied research initiative that explores the entrepreneurial process within business families and generates solutions that have immediate application for family leaders.
Families are the dominant form of business organization worldwide—they play a leading role in the social and economic wealth creation of communities and countries. To achieve continued growth and continuity, they must pass on the entrepreneurial mindsets and capabilities that enable them to create new streams of wealth across many generations—not just pass a business from one generation to the next. We refer to this practice as transgenerational entrepreneurship.
Leading academics and business families from around the world have joined as partners of the STEP Project to explore Successful Transgenerational Entrepreneurship Practices and create a stream of powerful practices and research that empower families to build their entrepreneurial legacies. Visit: https://www.stepresearch.org/
About Babson College
Babson College is the educator, convener, and thought leader of Entrepreneurship of All Kinds®. The top-ranked college for entrepreneurship education, Babson is a dynamic living and learning laboratory where students, faculty, and staff work together to address the real-world problems of business and society. We prepare the entrepreneurial leaders our world needs most: those with strong functional knowledge and the skills and vision to navigate change, accommodate ambiguity, surmount complexity, and motivate teams in a common purpose to make a difference in the world, and have an impact on organizations of all sizes and types. As we have for nearly a half-century, Babson continues to advance Entrepreneurial Thought & Action® as the most positive force on the planet for generating sustainable economic and social value.
About Dalhousie's Centre for Family Business and Regional Prosperity
Dalhousie is one of four North American universities and the only Canadian university involved in the Successful Transgenerational Entrepreneurship Practices (STEP) Global Research Project. As a team member since 2011, the Centre strives to introduce leading research in family business to the Atlantic region. Located in the Rowe School of Business, the Centre is uniquely positioned to educate students about the challenges and benefits that working in a family business entails
About the KPMG Enterprise Center of Excellence for Family Business
As with your family, your business doesn’t stand still — it evolves. Family businesses are unique. KPMG Enterprise Family Business advisers understand the dynamics of a successful family business and work with you to provide tailored advice and experienced guidance to help you succeed. To support the unique needs of family businesses, KPMG Enterprise coordinates with a global network of member firms dedicated to offering relevant information and advice to family‑owned companies. Visit: www.kpmg.com/familybusiness
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