Family business owners must proactively engage up-coming generations in order to prepare them for the responsibilities of succession, and business and wealth transfer, says intergenerational expert Claire Madden.
Speaking at Matthews Steer’s annual private wealth event in May Madden, the author of Hello Gen Z – Engaging the Generation of Post-Millennials, said the changing generational landscape had implications both for society, and for business, and that family businesses needed to establish organisational cultures that harness and integrate the strengths of Generations X, Y, Z, and beyond.
“We’ve seen a change in the way people approach work, and wealth, in just one generation,” said Madden. “Millennials and Gen Z are looking to do something they enjoy and to make a difference in the world. This is at odds with the generations that preceded them who were focused on retaining a secure job so they could build a home and a life for their family.”
Currently 70% of Australian businesses family-owned, and 1.5-million business owners are due to retire in the next decade. That, combined with the fact that 53% of private wealth is owned by Baby Boomers, means the differences between the generations’ life approaches have never been more relevant said Madden.
“For the Baby Boomers there is a gap between their intention to leave a legacy, and their aspiration to fund a better life for the next generation,” said Madden. “These younger generations see the world differently and that can cause tension. Business owners need to have open honest conversations with their family, and younger generation staff coming through, and map out a succession plan based on values and their business’ constitution.”
Madden says few Australian family businesses have a succession plan in place for selling their businesses, or growing their businesses to hand on to up-coming generations. Society is hardwired not to broach the difficult question of succession because of its intrinsic links with end-of-life. But she says it’s never too soon for family business owners to ask themselves: ‘how can we engage the up and coming generations of family and staff’.
“Technology and social media have created an environment where Gens Y and Z have grown up used to having a voice, and having it listened to,” said Madden. “If they join a business and they’re told ‘this is how we do things and we’re not changing that because it’s how we’ve always done things,’ they will become rapidly disengaged.”
Instead Madden says family business owners should identify long-term goals for family wealth, and include family members and staff members in conversations about succession.
“Teach the skills around wealth creation so the up coming generations can have a little go at creating wealth now and grow their capability,” said Madden. “Share the values forged in the older generations, tell them your wealth stories, and bring them on the journey with you so they will be good stewards of your wealth.”
As Builders and Boomers move from the wealth accumulation phase to the wealth divestment phase Madden acknowledged that there will be challenges around wealth transition through the generations. But she said there would also be opportunities.
“You know the cost it’s taken to accumulate your wealth and you don’t want it thrown away lightly,” she said. “Be open to taking the business in a new direction. There is much the up-coming generations need to learn, but they are the ones who you will be leaving your wealth to so it’s important to put a plan in place so you can leave a legacy for future generations, and so they will steward the wealth you have accumulated wisely.”
Anthony Flapper, Matthews Steer’s Head of Private Wealth, agrees that the key for families is to identify their values, share them across the family and identify goals for the family business. “Having the discussion and getting engagement is just the start,” says Flapper, “then it’s about education, security and protection, and about everyone understanding the succession journey.”
Claire Madden’s steps to successful succession planning
Identify long-term goals for family wealth.
Include family members and staff members in conversations about wealth and business transition, and succession.
Share stories around wealth creation, your personal journey to wealth, and the reasons you’ve chosen to support particular charities.
Train up-coming generations in the skills and responsibilities involved with wealth creation and retention.
Australia’s foremost social researcher on generational engagement, Claire Madden was speaking at Matthews Steer’s annual Private Wealth event on May 24. Speak to a member of our Private Wealth team for professional advice on developing a succession plan. If you are interested in attending future Matthews Steer Private Wealth events please email email@example.com.