The strength of kinship within a family, and the purpose and values they share, make the family business legacy a unique asset. The concept of a legacy is difficult, if not impossible, to replicate in other business models. It represents both the tangible and intangible assets: the financial, social and emotional value that the family has accumulated, adapted and continues to take forward.
With the next generation of family members who are faced with more career options, greater areas of interests and different priorities, we wondered if they might have a different outlook regarding the importance of value of their legacy than the many generations that have preceded them.
Could the importance of the family legacy be challenged in the future? Or is it something that all generations consider to be central to the family and the business – a privileged and valuable asset that is well worth preserving?
In research and interviews with family business leaders globally, conducted through a collaboration between KPMG Private Enterprise and the STEP Project Global Consortium, we examined the impact of changing demographics on family business practices and priorities such as succession, governance and the changing role and influence of women in family business. We also took a close look at the impact that a new generation of family members may have on the legacy of their family businesses. Their insights have been published in one of four KPMG Private Enterprise and the STEP Project Global Consortium co-authored articles entitled “The enduring legacy of business families: Sharing what matters across the generations.”
What we heard and learned from family business leaders throughout the world has reinforced my view that legacy is not only about looking back at what the family has historically valued and protected. Perhaps more importantly, it is about looking forward at what will continue to motivate next-generation family members to build on the family legacy and evolve it appropriately to make sure it is ‘future fit’.
How families are sustaining their purpose, principles and values
This future perspective may become even more important because of an emerging trend that we are beginning to see globally where more non-family CEOs are being appointed to lead family firms. Given the importance of embedding the family’s values in the business, we wanted to understand how the emerging “family owned but non-family managed” business model might impact the continuation of their legacies.
We had an opportunity to pose that question to a non-family CEO who was recently hired to lead a large and diversified industrial company in Mexico. What he told us was reassuring. He views the family’s legacy as the lighthouse for the management team, and the family’s purpose, principles and values are the guiding light. He emphasized that it is a priority for the management team to take actions and make decisions that follow the pathfinding spirit of the founding generation and sustain the family’s core purpose and values that have guided the business for three generations.
What is the asset worth?
Needless to say, this family’s selection of the first non-family CEO to lead the business was a careful and rigorous process did not address the technical, business management and leadership capabilities of the role. It was equally important to identify a potential leader who shared a similar sense of purpose and personal values to those of the family, and could clearly communicate how he or she would follow the founder’s core principles while also leading the business into the future.
When legacy is leveraged in this way as a means to learn from the past, while also creating continuous improvements in the business, it also serves to strengthen the emotional connection between the family and the business.
What this asset is worth may not be simple to measure. However, it is certainly one that warrants the investment of time, focus and effort in motivating future generations to continue to take it forward.
If you are interested in exploring deeper insights on the subject of family business legacy and the impact of a new multi-generational outlook, I encourage you to read our co-authored article, “The enduring legacy of business families: Sharing what matters across the generations.”
Also in this article series, you may be interested in the topic of family business succession in “The courage to choose wisely: Why the succession decision may be a defining moment in your family business.” the changing role of women in family business in “The power of women in family business: A generational shift in purpose and influence” and the importance of good business and family governance in “Creating value through good governance: How to balance what is right for the business and the family”.
Interested in learning more about how KPMG Private Enterprise can help your family business? Contact your KPMG Private Enterprise adviser or find a KPMG Private Enterprise Family Business adviser.