Family business makes up well over 65% of the Australian economy and controls in excess of $5 trillion in wealth. This figure holds true for just about every developed country in the world and a significant number of the developing countries. (These statistics can be accessed via firms like KPMG, EY, Deloittes, PWC and many national Family Business Associations). In Australia, it is estimated that $5.3t in wealth will transfer over the next 20 years with approximately 40% of this being in agriculture and agri-business.
This raises the critical question of “How many family businesses actually have a robust succession plan?”
As an accredited family business strategist I pose a deeper question; “How many family businesses have an intergenerational continuity plan that facilitates succession?”
Well in fact the statistics also show that between 5% and 8% of family businesses have a formally documented plan that facilitates succession while focussing on multigenerational continuity. In agriculture this figure is between 2% and 5%. Given the quantum of wealth to be transferred in the relatively near future, the rapidly evolving business environment and the disruption being caused by technology and socio-political unrest we all have to take a step back and assess the barriers to this critical family business process.
In other articles and publications (including videos) I have explored the need to understand family business dynamics, the importance of the family genome and the connectivity between family values, family legacy, custodianship and stewardship. I have also canvassed the requirement to develop a “succession team” that works for your family business along with the necessity to have robust strategic thinking, risk awareness and governance. However, in this article I want to address the “fear paradigm” that is a significant barrier to taking the leap into Family Business Continuity Planning including Succession Planning.
The “fear paradigm” has its base in a number of areas and is not just within the family members. Professional services, employees and segments of the supply chain also possess this “fear paradigm” as it incorporates change and disruption to the status quo. Some areas of the “fear paradigm” include fear of;
- the unknown
- becoming irrelevant and / or unproductive
- diminished worth or value
- change in relationships
- business loss or realignment
- change in strategic direction
- not having anything to do
All of these have the undertone of loss or “death of their efforts”, which is a valid emotional reaction to the question of succession planning. However, just cast your mind back to when the current generation took over from the last – Did this exiting generation “die”? Did the business suddenly fail? Did things change? – The answers would be No, No and Yes.
Based on the above information it is critical to emphasise the opportunities the younger generation provide for the family business. I do not for one minute suggest whole sale transfer or anything that remotely resemble the traditional perspective of business transfer. My emphasis is on embracing the opportunity to commence the intergenerational continuity journey and succession planning process while celebrating the family’s legacy.
The future business environment will demand new business models and more diversity in strategic thinking within the business. The future will also demand speed of decision making, embracing technology and taking greater risks. The younger generation is well equipped to drive this renewal within the family business as they have the education, are innovative and technically savvy, are globally connected and have the energy required. On the other hand the incumbent generation/s have the experience, control of the finances and possess deeper risk awareness.
It is these things in combination that highlight the reality of succession being the opportunity for renewal as opposed to death. It is time to identify the “fear paradigm” and disrupt it for the future of the family business. By embracing am “opportunity for renewal paradigm” the family business can retain its values, leverage its legacy, embed a new generation of custodians and stewards while achieving family harmony.
Will this be easy? – No
Will there be conflict? – Yes
Can it be achieved? – Absolutely
To assist with this the family business and all of their professional services, advisers and consultants need to align with the family values and legacy. This was outlined in a previous article titled “Family Business Continuity – Challenging Perspective” In addition to this article I have published a suite of twelve (12) videos called Family Business Matters. The short version of these can be viewed on www.lloydrussell.com.au while the long versions are located on the business educational platform www.brin.ai/experts
In closing, outcomes that can be achieved by the family business include;
- Shorter more efficient supply chains
- Increased market penetration including loyalty
- Opening up of new business opportunities
- Increasing the businesses competitiveness
- Increased returns to shareholders
- Higher performance from professional services, advisers and consultants
- Business and family security
Lloyd Russell is a 4th generation family business member and an accredited family business adviser who is based in Brisbane while servicing clients throughout Australia and internationally. Lloyd is a specialist in family business strategy and governance with a particular focus on inter-generational transfer. He has more than 30 years’ experience in senior management and is an accredited neuroscience practitioner.