Future focus: The next generation weighs in on how they will lead US family businesses
75% See business growth and talent as the key priority over the next two years
45% Say offering the right products and services for today’s customers is key to growth
60% See the opportunity to lead the way in sustainable business practices
23% Are currently engaged in reducing their company’s environmental impact
For the first time in the history of PwC’s Global NextGen Survey, we’ve called out specific findings to the next generation of family business leaders in the United States. The report highlights their laser focus on key priorities that can move family businesses forward, even as they grapple with important issues like the global pandemic, a shifting economy and sustainability. While there are similarities with the global report, we’ve found unique challenges and opportunities experienced by NextGens in the United States.
The three key areas of focus for US NextGens include: growth through new products, new markets and M&A opportunities, attracting and retaining talent, and leading the way in sustainable business practices. These strategic priorities can help them navigate their family business through a maze of challenges that have not been in play for decades.
What are the family business priorities for US NextGens?
NextGens had to consider some difficult tradeoffs to identify and prioritize the elements that will produce the greatest impact on their family’s business—both now and in the future.
Business growth and talent management are their most important priorities, according to our survey. While their global peers ranked these priorities similarly, a much larger percentage of US NextGens deem these areas vital to moving forward.
Although US NextGens recognize the importance of environmental, social and governance considerations, ESG-related priorities rank at the bottom of the list when NextGens face the hard choice of what to focus on for the business. This is not the case for global peers who ranked environmental concerns, sustainability and impact much higher.
Family business growth according to US NextGens
Three quarters of US NextGens see business growth as a key priority over the next two years (compared to 65% globally). The high percentage could be due to cultural differences in the United States or because the US economy typically outperforms the rest of the world, but growth is often top of mind for family business leaders. Family businesses have a special reason to feel the pressure to grow because as the size of the family increases, more revenue is required to support the members. A shared family capital strategy is one way families can think holistically about sustaining multi-generational wealth.
As companies grow, the level of complexity tends to increase. Many families consider a family office as a way to manage this complexity, meet their financial needs, provide greater control over their wealth and handle their personal affairs. Typically, a family office is needed when the family grows to include more generations, or when more formal governance becomes necessary. According to our findings, 55% of US NextGens report having a family office—however there’s no one-size-fits-all approach. A family office can be organized as a separate entity or it may be embedded in one of the family’s operating companies. Here are some examples.
- Multi-family office: Great for families that aren’t too complex. This can be a cost-effective model.
- Single family office: Fully separate the family’s personal dealings from the business. Makes it easier to eventually sell or go public with their legacy operating entity.
- Virtual family office: A viable option for globally diverse teams and families, this can be an extremely cost-effective model.
- Hybrid family office: Best of both worlds—outsource aspects of the family office while still maintaining an embedded family office for select functions.
How can family businesses grow?
Our survey, along with additional data, shows that NextGens are focused on three key paths to growth.
45% of US NextGens see confirming that they have the right products and services for today’s customers as a key priority.
38% of US NextGens see expansion into new sectors/markets as a key priority.
45% of US family businesses cite pursuing strategic acquisitions or mergers as their top priority.
71% of US NextGens are now or will be personally actively engaged in talent acquisition and management.
NextGens prioritize attracting and retaining talent for family businesses
Talent is tied with growth as the top concern for US NextGens. Three quarters of respondents see talent acquisition, management and retention as a key priority over the next two years (compared to 48% globally). Talent is often considered a growth driver and could be essential for family businesses focused on delivering their growth goals through their people. In fact, in PwC’s February 2022 Pulse Survey, 92% of private companies indicated that hiring and retaining talent is very important to their growth.
Growing up in the family business, NextGens generally have a deep understanding of its values and missions and can be stewards of leveraging the cultural identity of the business to cultivate trust with both current and potential employees.
Now is the time to act on ESG
ESG is a hot topic and the trends driving the need for sustainable business practices are here for the long-term. Though ESG reporting isn’t required for private companies, savvy consumers and the younger generation that put more emphasis on sustainability factors tend to prioritize products and services from companies they perceive as acting responsibly, whether it’s the products and services they want to buy or the companies they want to work for.
Though 60% of US Next Gens see the opportunity to lead the way in sustainable business practices, only 23% are currently engaged in reducing their company’s environmental impact. It’s possible that this discrepancy is caused by competing priorities that feel more urgent—like growing the business and managing talent.
Mismatch on ESG priority versus action
60% of US Next Gens see the opportunity to lead the way in sustainable business practices, but…
23% are currently engaged in reducing their company’s environmental impact.
(Courtesy PwC By Renee Klein, US NextGen Program Leader, PwC US. Jonathan Flack, US Family Enterprises Leader, PwC US)