Unlocking legacy in family businesses
Discover how leading family businesses are balancing tradition and innovation to achieve superior business performance
Legacy is a powerful force behind the sustained growth of family businesses. It connects generations, shapes long-term vision, and serves as a source of identity and inspiration.
Based on a survey of 2,683 family business leaders from 80 countries, regions and territories, 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.
But while legacies serve as a source of identity and inspiration, the report reveals how they can also have the potential to hinder innovation and change. This is the "legacy paradox": the challenge of balancing traditional values with modern business strategies to build a legacy with future generations in mind.
Find out why legacy matters with key takeaways on:
- How the family’s legacy is a high-value asset that contributes to superior business and sustainability performance.
- Why legacies are important for connecting the past, present and future in making strategic decisions.
- How strong legacies contribute to socioemotional wealth and transgenerational entrepreneurship.
- Why it’s important to recognize that legacies may become liabilities if they are too entrenched in tradition and stand in the way of innovation.
Dive into our thinking:
Unlocking legacy — The path to superior growth in family businesses
Balancing tradition and change for enduring success
Download PDFHow KPMG Private Enterprise can help
Your business has a unique element that no other business has – the aspect of the family. This difference can play a significant role in decision making and offers both opportunities and challenges. KPMG Private Enterprise advisors understand that the growth and sustainability of your family business lies in the fine balance between the needs of the business and the expectations of your family members. The top three areas where KPMG Private Enterprise can help include:
Growth: To achieve sustainable growth, businesses should explore market opportunities, acquire complementary companies, divest non-core businesses, outsource functions for cost efficiency, and expand into emerging markets. KPMG Private Enterprise advisers can assist in developing a growth strategy and achieving new heights.
Wealth: Secure the future of your business and personal wealth with KPMG Private Enterprise family business advisers. They can help develop an estate plan for wealth transfer and a succession plan for your business, minimizing risks like family conflict, high probate, and other fees.
Transition: Transitioning a family business is challenging, with potential for conflict and strained relationships. Plan ahead for a smooth experience. KPMG Private Enterprise family business advisers provide insight, manage sensitivities, and assist with transactions or successor transitions.
What legacy component should you focus on?
Based on our survey data, it appears the strongest legacy components that contribute to good business performance and sustainability may be ranked in the following order:
1
Social
Social legacies are built on the family’s shared values, attitudes and beliefs, and the focus tends to be on building strong community relationships and making the world a better place.
2
Identity
When the family’s identity is embedded in the business, storytelling is often a central pillar of the family business. Shared family stories and rituals are woven into the business through the family’s identity, values and history, and the family’s identity often functions as an informal governance mechanism for resolving family conflicts.
3
Biological
A biological legacy — such as the family name and bloodline — reflects a commitment to sustaining the family’s cohesiveness and the continuity of the business.
4
Material
Material legacies include tangible assets that underly families’ financial value and wealth. They may include physical items such as heirlooms that have sentimental value to the family, as well as land, property or family wealth that is passed from one generation to the next.
Key takeaway – the interdependency of legacies
On the family business journey, there are interdependencies ─ and trade-offs at times ─ among each of the components of legacy. As the life of a family business changes across the generations, the focus may shift from one legacy component to another.
Why are family businesses focusing more on their legacies now?
As greater numbers of younger generation family members are beginning to enter their family businesses, there is an increasing need to focus on the future by:
- Listening to the needs and ambitions of future generations
- Defining and communicating the core values and vision of the family and the business
- Building generational bridges to foster family unity and harmony
- Sharing the family history while also committing to innovation and adapting to change
- Promoting responsible stewardship of the business
- Cultivating a philanthropic environment
- Passing on expertise and knowledge while also embracing transgenerational entrepreneurship
- Adapting to changing market dynamics
Source (for all market commentary and data cited on this page): Unlocking legacy – The path to superior growth in family businesses, KPMG Private Enterprise and STEP Project Global Consortium, KPMG International, May 2024
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