In my view, COVID-19 has not changed the strategies of family businesses as much as it has accelerated the pace of their evolution. This accelerated pace has also amplified the need for greater involvement of multiple generations of family members. In response to COVID-19, and in true family business style, families came together across the generational divide to address the immediate impact of the pandemic on their business. It didn’t take long for seasoned family leaders to recognize the value of their younger, tech-savvy family members who prompted new ways of thinking about the future of their business.
The blending of the generations, and the opportunity to realize the value of their differences, has been empowering and transformational in family businesses.
The power of difference
Well before the onset of COVID-19, we saw how the influence of different generations was a catalyst for uncovering new ideas, and in 2019, KPMG Private Enterprise and the STEP Project Global Consortium came together to deepen the understanding of the opportunities and challenges of multi-generational families and the impact on their family business practices.
Based on extensive research among family business leaders worldwide, we published a collection of co-authored articles “Empowering the future of family business: A four-part article series of research-based practical insights”, which examine the impact of changing demographics on family business succession, governance, the changing role and influence of women in family business and legacy.
It’s not surprising that the research revealed the push and pull between different generations within family businesses – and how each generation’s skills and ambitions can sometimes put a strain on the business (and the family). More importantly, however, the research also showed that many family businesses have recognized that the generational differences can be real assets that give the business a valuable competitive edge.
When COVID-19 struck, the net value of those generational assets grew exponentially.
Having several generations involved in addressing the impact of COVID-19 increased many families’ ability and interest in taking their businesses in new directions. With this focus on the future, our latest collaboration with the STEP Project Global Consortium has included important research on the impact of COVID-19 on family businesses globally, and the multi-generational influence that has enabled them keep looking forward.
Our Global family business report: COVID-19 edition titled “Mastering a comeback: How family businesses are triumphing over COVID-19”, highlights the actions that family businesses have taken to stabilize their businesses, and the amplification of a bold new strategic outlook that we believe is putting many family businesses in a strong position to lead the global economic recovery.
We found that family businesses were quick to realize that more involvement and input was needed from the entire family as they began to understand the immediate impact of the pandemic and the need to have a clear view of its future prospects.
In many cases, retired family members came back into the business to share the actions they had taken to successfully manage unexpected business and economic crises in the past. Tapping into the historical memory and experiences of previous generations paid off by accelerating their ability to stabilize the business quickly.
The pandemic also opened up opportunities for young, tech-savvy family members to take on prominent roles by introducing digital technology solutions to streamline their business operations and to develop a host of new digital products and services.
As my colleague, Christian Rast, Global Head of Technology & Knowledge, KPMG International, pointed out in a recent blog post on the Top 10 tech trends of 2021, “2020 was a year of massive digital change in response to COVID-19. It doesn’t take a crystal ball to see that digital transformation and adoption are no longer optional – they’ve become a business imperative and can make all the difference between the future and the failure of an organization.”
We have many NextGen influencers to thank for accelerating their firms’ digitization agendas. We also can thank them for making the integration of environmental, social and corporate governance (ESG) and business strategies an urgent priority for the transformation of many family businesses. By sharpening the focus on ESG, they have expedited the operational changes necessary for achieving environmental and societal goals, and firmly embedded ESG as a strategic business priority.
This is what making the business fit for the future looks like.
Family and business: fit for the future
Making sure the business is fit requires the family to be fit for the future as well – and family businesses are recognizing that imperative. I’ve observed a dramatic increase in family conversations, for example, on several governance and succession-related questions that are being accelerated as business opportunities unfold in entirely new directions.
With an eye on the future, family leaders are asking important questions such as:
- Going forward, what do family members really want from the business – financially and non-financially? How might this change from generation to generation? How can we adapt to meet their needs and ambitions?
- What parts of the business should we keep, and what should we change or let go?
- How can we sustain the family’s values and purpose to protect our legacy among generations that have new priorities, such as focusing more on ESG?
- How can we choose a successor who is right for today – and the foreseeable future as new technologies continue to accelerate?
I believe there is tremendous value in openly addressing these and many other questions with each generation of the family involved. The family itself is, after all, a unique characteristic of family businesses, and one that represents a strong competitive advantage. I believe that makes it an asset that is worth cultivating for both the business and the family to continue to be fit for whatever the future holds.
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.