Family and legacy go hand in hand and most families in business have a desire to connect and contribute to sustaining their legacy across the generations. One way we do this is by sharing and maintaining the things we value, such as important traditions, milestones, personal histories and the family’s beliefs and principles. In family business, legacy is the connective tissue that binds the core purpose of the business, the family’s values and meaningful achievements across multiple generations. It represents both tangible and intangible assets: the financial worth and the social and emotional value that the family has accumulated.
In family business research, legacy has been used to explain entrepreneurship, customer relationships and longevity. To illustrate the findings of the STEP 2019 Global Family Business survey (PDF 19.9 MB) with firsthand experiences, KPMG Private Enterprise and the STEP Project Global Consortium went to the source: family business leaders across the globe who joined us for conversations about their businesses and family legacies. They emphasized that business and family legacies are inextricably intertwined.
They also reminded us that legacy is not only about looking back at what is valued from a business and family point of view, but also about looking forward at what motivates families to want to continue to build on that value through future generations.
Each family’s legacy is as unique as the family itself. It can be a bloodline, a name, heirlooms, a legal entity or family stories, myths and artifacts.1 In most family businesses, the legacy also includes the principles, purpose and values that underpin both the family and the business.
As a third-generation family member and shareholder of of an industrial manufacturing company in Mexico explained to us, “Legacy is a vital part of our history that has to be nurtured, protected and grown and it is a big responsibility for the family to take it forward. The worst thing would be to pass on something to the next generation that is less than what you received.”
The choices that one generation makes will affect the choices of every generation that follows, making it important for older generations to ‘make space’ for the next generation to make their own decisions about how they will take the legacy forward.
In family business, legacy is the connective tissue that binds the core purpose of the business, the family’s values and meaningful achievements across multiple generations.
The family legacy typically includes the principles, purpose and values that underpin both the family and the business.
By its very nature, the family is a stable social grouping that has been sustained throughout society. Though there have been transformations and variations over time, family remains a “unity that can be distinguished from other forms of social organization”.2 In contrast, businesses are less stable. In fact, some US statistics suggest that more than half of new businesses will cease to exist within their first 5 to 10 years.3 It makes sense, therefore, that a familiar way in which family members often refer to their business legacy is in relation to the impact that the family’s purpose, values and principles has had, and will continue to have, on their business.
While the legacy that is left for future generations is generally welcomed and accepted as a ‘gift’, the obligation to carry it forward can be seen as a burden by some. Several family business leaders with whom we spoke talked of the “burning requirement” for the family to be involved in the business to continue its legacy and how that can become a heavy responsibility and a source of tension.
However, Mr. Luiz Alexandre Garcia, Chairman of Brazil’s Algar Group, emphasized to us that while sustaining the family and business legacy in his family firm is a weighty obligation for younger generations, it is important for them to understand their responsibility as shareholders. Beyond their ownership responsibilities, they are encouraged to pursue other personal ambitions without any sense of obligation to work in the company. If they’re prepared to be successful on their own merits outside the family business, they are encouraged to follow their own dreams and interests.
The pragmatic nature of family business and its long-term prosperity are closely connected with the ‘generative’ nature and emotive underpinnings of the family’s legacy, which is how families code, transfer and translate their legacy across multiple generations.
When legacy is leveraged as a means to learn from the past, it creates continuous improvements in business processes and strengthens the emotional connection between the family and the business.
A family business is an asset that has value at a specific point in time. Its legacy is the generational value that the business family has contributed over several periods of time. This legacy is not something that the next generation is simply given, but a responsibility they are asked to undertake to maintain the success of the business and the reputation of the family.
Receiving a legacy is often seen as an honor and a privilege and a legacy conversation can be a very positive one about “bringing it forward” and growing it. However, there is also an appreciation for the significant responsibility that comes with carrying on the legacy. It can be challenging to think about achieving what your parents or grandparents achieved and how they did so with far fewer resources at their disposal. Will I ever be as good as them? How can I continue to honor what they have created?
The responsibility to be a good owner and steward also grows exponentially with each generation. Founders who fail with one idea often go back to the beginning and start over. The asset that future generations are responsible for taking forward usually involves many more people and the impact of its success or failure can be more substantial as a result.
There is no going back, but it isn’t always easy to move forward either. Although there may be different points of views among different generations as to how to manage the business, there is one thing that remains constant: the desire to maintain and grow the business and the family’s legacy. Even for family members who might not work in the company, legacy is a responsibility that each generation must perpetuate to disseminate the principles and values of the family and the business and the obligations of being an owner.
The desire to preserve family business legacy can be an asset or a liability for the family business, depending on how it translates into business practices.
While most future generations view legacy as a ‘gift’ to be preserved, some see the obligation to carry the legacy forward as a burden.
There is a clear overlap between the values that represent the family and how those are extended to create and sustain a family business legacy.
Family members in our interviews saw their family identity reflected in their business activities. Mr. Luiz Alexandre Garcia, the third-generation Chairman of Brazil’s Algar Group described it in this way: “Algar Group has operated for 90 years in many different fields and the business has changed a great deal in that time. But the principles, purpose and values of the company have never changed. That’s our primary legacy. It is what has brought the company to its position today and what will carry us into the future.”
Given the importance of family values, we were interested in understanding the impact of the emerging “family-owned but non-family managed” business model on the ability to sustain the legacy of business families. A recently hired and non-family CEO in Mexico explained that he views the family’s legacy as the “lighthouse” for management. The question for the managers is not simply “where do we want to go?” but also “how do we want to get there?”.
The family’s purpose, principles and values are the guiding light. He understands the critical importance for management to continue to embrace the pioneering and innovative spirit that the founding generation embodied.
Family members often refer to their business legacy in relation to the impact that the family’s purpose, values and principles have on the significance of the business.
In family businesses that are led by a non-family CEO, the clarity of the family’s purpose, principles and values will be the guide for how decisions are made and how the firm is managed.
Many family businesses create and sustain their legacies by making meaningful contributions to the communities around them. Often, this takes the form of philanthropic activities with family members and their businesses giving back to society through financial contributions to organizations that are important to them. Many also make significant ‘gifts in kind’ by donating their time and sharing their expertise on community and charity boards.
In several of our interviews, we learned about the substantial contributions that many family business leaders and multiple generations of their family members are making to long-term social initiatives that reflect the family’s values and purpose in consequential ways.
The involvement in social issues that Mexico’s Grupo Urrea has shown throughout its history, for example, began with the actions taken by its CEO, Raúl Urrea Avilés, in the mid-1950s. In his eyes, the perfect indicator of the company’s success was a comparison between the welfare of the company and that of its employees. He became president of COPARMEX (the Employers' Confederation of the Mexican Republic) and worked together with the Confederation of Mexican Workers to create the Institute of Social Welfare of Jalisco to provide dignified housing to workers in the region.
Grupo Urrea’s commitment to workers continues to this day and legacies such as this engender a tangible commitment to corporate social responsibility that often becomes the tightly woven thread that ties families together across the generations.
Most of us would like to know that we’ve contributed something to the world and the lives of others that is worth being remembered and carried on. As with many aspects of family business, creating and sustaining a meaningful legacy has additional significance. Not only does it represent the achievements of the business, it is also a reflection of the character of the entire family and what they want to pass on for future generations to maintain and adapt.
Through our conversations with family leaders and members of their families across the globe, we have gained practical insights into how families are using their accumulated knowledge and experiences to strengthen their businesses. We’ve seen how family values are continuing to be embedded in their businesses and their motivation to not only extend their family and business legacies, but to nurture and guide their continuing evolution.
This reinforces our understanding of how the stability of the family as a social organization is being leveraged to support and sustain family businesses. It is clear that family and business legacies are important to each other and to each generation that receives them as a gift.
Through our discussions with family business leaders, we learned how transferring their values into their businesses continues to be central to their family and business legacies. While this may be seen as a burden or a challenge by some, we were encouraged to hear from most that the opportunity to carry these legacies forward is a strong motivator and an opportunity to be embraced.
It is our hope that this will encourage more family businesses to continue to unite the purpose of their business and the family’s values for an enduring legacy that the generations of the future are inspired to carry forward.
If you are interested in learning more about the families who contributed to our legacy, succession planning, governance and women in family business discussions, we encourage you to read the profiles of these prominent family business leaders and their businesses in the family business profiles section.