Unlocking legacy in family businesses

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 :

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.

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.

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

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 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.