The upcoming demographic issue of Gen X and Y taking over from the babyboomers in family businesses is barely addressed both within businesess and the media at large. What many do not realise is the importance of communication, planning and education in a successful succession, which are often ignored until it is too late. David Harland – Family Business Advisor
Do you see a cultural chasm between generations in your family business? A recent survey by PwC found that factors like technology, demographic trends, and societal shifts have significantly widened cultural gaps between today’s business leaders and their prospective successors.
Conflicts between generations are nothing new. The results of the study bring to mind a no-doubt apocryphal quote usually attributed to Socrates:
“The children now love luxury; they have bad manners, contempt for authority; they show disrespect for elders and…contradict their parents.”
Older generations have probably always fussed about perceived differences in values among the young. The reason these survey results matter is nearly half of current family business leaders plan to exit their businesses over the next few years and generational gaps will make these critical transitions that much harder. Learning how to bridge these divides may well be crucial to your firm’s ability to navigate the succession process.
The PwC report identified several persistent points of conflicts between generations: communication, credibility, and cultural differences. Current business leaders fret that their children are not sufficiently entrepreneurial and aren’t interested in putting in the long hours required to be successful. Parents worry about their children’s ability to manage complex family and business dynamics.
On the other hand, potential successors are frustrated by their elders’ inability to let go of control or embrace technology. According to the survey, 80 percent of future successors have big ideas to grow the business. Others plan to professionalise areas of HR and finance or bring in outside executives. Despite having taken professional training or management degrees, many are concerned about gaining respect from co-workers and customers or establishing authority when taking on higher-level responsibilities.
Even families that have good working relationships between generations have areas where communication breaks down. In many firms, conversations about succession or the future direction of the business are verboten. Baby boomers may be hanging onto their businesses longer than previous generations, partly because they had children later in life, but also because many are working in the business well into their retirement years.
In order to overcome these generational gaps, I believe that current and future business leaders should consider the following:
Communication: I believe strongly in creating formal structures for dialogue and dispute resolution. Communication can be incredibly challenging in a family business because of the potentially volatile combination of business, money, and family dynamics. Family councils or regular meetings with a professional mediator can help get emotionally charged issues out into the open.
Credibility: In my experience, most well prepared successors have acquired experience and credibility by working outside the family firm. There are many benefits to doing so, including building a professional reputation on merit alone and gaining valuable exposure to new ideas. I see many businesses struggling with a lack of innovation and experience with new ways of thinking can help spark important change.
Cultural clashes: Research into generational behaviours has shown (and I’m generalising here) that boomers tend to focus on financial and material acquisition and value hard work. However, their definition of hard work often emphasizes face time and physical presence in the office.
In contrast, many next generation employees, having grown up with technology and greater luxury, want the freedom to get work done outside the office and value a greater flexibility in work and life. This difference in working styles and values is ripe for conflict, and it’s important to – as a family – develop an appreciation for different ways of getting things done.
After some assistance dealing with your generation gap? Contact FINH on 07 3229 7333