It’s an issue that often comes up in conversation with family business clients: the enthusiasm of the ‘next generation’ to be involved in running the business may be waning.
The young generation of today has grown up in a global and digital environment and their horizons may be quite different to that of their parents and generations before. Of course they have an interest in the family business – they’ve been brought up surrounded by conversations about it almost every day – but whether they want to actually commit a large portion of their lives to carrying on the legacy is open to question.
This is a subject that’s very much on the agenda in China, one of the SME powerhouses of the global economy. Many first generation family businesses there have generated considerable wealth in manufacturing and export, and have used it to provide education and travel opportunities for their children – who are then not so drawn to working in an ‘old world’ manufacturing set-up.
That may be an extreme example, but the same principle applies in the UK and other developed nations and it’s why I’ve found myself discussing it with clients increasingly regularly over the last few years.
At the same time, with running a business becoming so much more complex and demanding in recent times – after all we’ve had a global pandemic and a global financial crisis in just the last 13 years – some ‘now generation’ owners are asking themselves whether they even should burden their children with carrying it on. Maybe they should look at other options – divest, diversify, or bring in an operational management team while the family takes a more hands-off strategic role? That’s probably a question for a whole separate blog!
Digitisation and ESG: an opportunity to re-engage?
But in terms of engaging the next generation, could the pandemic prove to be a catalyst for changing the dynamic?
Two key fundamental shifts have been brought about through Covid-19. Firstly, it has massively accelerated the move to digitisation. All businesses, large or small, and almost agnostic of sector, have needed to upgrade their digital offerings, move to more virtual ways of working and quicken the pace of their transformation through technology. This is by no means ‘done’ – it is an ongoing process where many family businesses have much further to go.
Secondly, the pandemic has heightened the importance of strong environmental, social and governance (ESG) values and commitments. It has changed the lens through which many people look at life, underscoring the need for a sense of purpose beyond mere profit.
Hand in hand with this, the focus on climate change has truly rocketed in recent times, with the COP26 conference in Glasgow putting the issue centre stage across the world. ESG is an area where many family businesses are naturally strong – they have active social responsibility and community engagement programmes, perhaps with a charitable foundation set up. But there is always further to take this, and the business may be significantly less developed in terms of sustainability and the transition to a low carbon or Net Zero footprint. This matters on many fronts: any responsible business should be striving to reduce its carbon footprint, but having an active (and measurable) programme could also become increasingly important when looking to secure secure funding, investment, attract and retain staff or when bidding for large corporate and public sector contracts.
Both of these issues – technology and ESG – are areas that truly resonate with the next generation. They are digital natives after all, steeped in social media and online connectivity. Technology is part of how they live their lives. While ESG, and climate in particular, is a burning platform that many young people are passionate about driving action and change around.
A place in the Boardroom
Bringing these twin passions to bear in a real world context on the family business could be the way to truly re-engage many of the next generation.
To be effective, however, they will need to be given meaningful and substantive roles. They should have a seat in the Boardroom and be genuinely involved in strategic discussions.
It won’t tick the boxes for all the up and coming generation. Some won’t need extra motivation anyway as they’ll be keen to carry on the family legacy and keep growing what previous generations have created.
But for many Millennials, it may be that the pandemic has spawned fundamental shifts that open the way to highly relevant, meaningful and rewarding roles in shaping the family business as it evolves into the future.