Unlocking legacy in family businesses

How can family businesses balance tradition with innovation and create a legacy and a successful business that spans generations?

Finding ways for tradition and innovation to co-exist is one of the most common challenges in building a lasting legacy in family businesses. By exploring the essence of legacy and its impact on business performance, the detailed data analysis, academic insights and the firsthand experiences of family business CEOs in this report contribute to a deeper understanding of the importance of balancing tradition and innovation for long-term success in family businesses.

Based on a survey of 2,683 family business leaders from 80 countries, regions and territories, including responses from Canadian family businesses, the STEP Project Global Consortium and KPMG Private Enterprise report reveals an important link between the strength of a family business’s legacy and its long-term business performance.

We examined four legacy components :

Material

Including artifacts such as family heirlooms, land, money and sentimental objects

Identity

Values, attitudes and beliefs that are shared through family stories and rituals

Biological

The family’s bloodline, name and genes

Social

Maintaining a positive standing in the community

Family legacies blend tangible assets and intangible values driving both financial success and sustainable performance whilst deepening emotional ties that shape a family’s identity. It is this critical blend that inspires innovation and fortifies connections across generations.

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KPMG in Canada

The essence of legacy is future-centric

Not only does legacy connect generations and help ensure the continuity and heritage of entrepreneurial success, but it also shapes the long-term vision of the family’s business and guides their strategic choices. Should they expand into new markets? Invest in cutting-edge technology? Diversify or stay true to their traditional business operations?

Legacy may sometimes weigh heavily on those choices and we believe it’s necessary for family businesses to recognize when it’s right to lean on tradition or when they should dare to leap into the unknown — without the fear of losing what defines the family and the family enterprise.

And so, while legacy has often had a historical perspective, a more contemporary view expands that definition by recognizing that legacy is an important building block for the future because of the positive contribution it makes to business performance and the environmental, social, employee and supplier sustainability impact of family businesses.

This future-oriented view of the “essence” of legacy is an important perspective — not only because of the impact it may have on your business today, but how you can leverage it for the success of future generations.

As you’ll see from the findings in this report, the highest performing businesses also tend to have the strongest legacy scores, which suggests there is a compelling link between the depth of the legacy of a family business, its financial performance and the strength of its sustainability practices.

In today’s environment, the concept of legacy poses new challenges for family business leaders. The paradox of legacy requires a mindset that balances the importance of two conflicting truths, the importance of sustaining traditional values and the importance of driving innovation. Leaders who can hold space for this paradox create the conditions for future generations to thrive.

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KPMG in Canada

The legacy paradox

Legacy is a source of identity and inspiration, but it can also be a liability if it is so entrenched in tradition that it stands in the way of innovation, change and agility. In some cases, it may even lead to family disagreements that disrupt family relationships and unity when younger generations who are focused on innovation and adaptability may challenge older generations who are committed to preserving tradition and maintaining a hands-on approach.

This is the “legacy paradox”.

The choices that one generation makes affect the choices of every generation that follows. And as is the case with anything that’s worth keeping, legacy requires attention and careful management to help ensure it continues to generate value for the family, the business and all its stakeholders.

With a greater number of younger generation family members entering their family business, there is an increasing need to focus on the future.

Building a legacy that stands the test of time

To help build, nurture, and sustain a family business legacy, we believe a strategic and holistic approach is essential. The following is a selection of practical recommendations for family businesses that are aiming to achieve this goal:

Define and communicate core values and vision
Preserve and share the family history
Innovate and adapt to change
Foster family unity and harmony
Promote responsible stewardship
Cultivate a philanthropic environment

Family businesses play a vital role in creating and preserving wealth by managing their resources responsibly and reinvesting in their business. They not only pass on their financial assets to future generations but also their values, knowledge and expertise.

Deena Chochinov

Director, Family Office

KPMG in Canada

Shaping the future from the past

The legacy of family businesses is deeply intertwined with the past and the future. While they’re widely recognized for the rich history, values and heritage that are passed from each generation to the next, family business legacies reach well beyond their historical foundations. In reality, legacy is a building block for future generations to build upon and expand the hard work of their founders.

We believe that legacy is not only central to the identity of family businesses, it’s also crucial for maintaining the authenticity and endurance of entrepreneurial businesses through every succeeding generation.

Explore the global report

Explore the full report below to learn more about what this means for your family business, including steps you and your family can take to uncover the strengths of your legacy.

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