Governance in a family enterprise is evolution, not prescription: it requires consistent discipline, and strategies and structures have to be adapted not only as the business and the family change and grow, but also as the world changes economically, commercially, and demographically. Family enterprises should always know what type of enterprise they are, which challenges they face at each stage, and which structures and decisions they need to work. Governance is always a work in progress, never a completed project.
Inevitably, family enterprises will have to confront challenges in the coming years. A cultural trend that we have begun to detect as advisers in the world of family business is that the generation that is starting to inherit now is less naturally obedient and more short-term oriented than previous ones. The younger generation appears to be more individualistic, with respect to the clan, but also highly collaborative and internationally oriented, through connections made while studying abroad, and through internet-based social media such as Facebook, Twitter, and so on. Society and corporate culture have become less patriarchal, and families will eventually also have to evolve towards that new paradigm.
There is an obvious challenge for family enterprises here. What will they need to do to attract their talented next-generation members, keep them motivated, and retain them? This challenge will have a crucial impact on the survival and the growth of their businesses.
If the direct influence of the patriarch on the clan appears to be diminishing with demographic and cultural changes, exercising influence is more likely to be through education than imposition of will. In many cases, the high educational standards of the younger generation will help this.
In addition, the wealth generated by a successful family enterprise can lead to a sense of entitlement among inheritors – such is human nature. Education on values also plays an important role in lessening the impact of this phenomenon.
Retention of owners may prove to be a challenge, too, in an age of growing entrepreneurship and global capital. Will someone inheriting shares in the family firm be tempted to sell them to invest in a start-up founded by a fellow university student?
How to find other solutions to those challenges and to read about the other challenges family enterprises will face in the coming years, you can read in “Governance in Family Enterprises”.
Please contact your local KPMG member firm professionals. If you want to read more about family business governance and family constitutions, please see: Governance in Family Enterprises – Maximizing Economic and Emotional Success, by Alexander Koeberle-Schmid, Denise Kenyon-Rouvinez and Ernesto J. Poza, Palgrave Macmillan, ISBN 978-1-137-29389-3, entitled to a 20% discount with the promotional code WORLDPALGRAVE20 if ordered through http://www.palgrave.com.