Does growing up around money and success mean your kids will be successful with money in the future? Not necessarily —though there are ways to improve the odds, says KPMG’s David Kilshaw
YOU MIGHT EXPECT an accountant to say this, but successful families know they can turn to their accountants for more than just tax and audit advice. At KPMG, we have the privilege of working with many family companies, which gives us a chance to observe how these businesses grow profitably and sustainably without wrenching apart the founding family. They are examples of best practice, but they are, understandably, exceptional rather than regular.
Even if many families do not yet run with anything like harmony or smooth proficiency, they are now much more aware that perhaps they ought to do something about it — and they now know who they can ask. We are increasingly finding families want to learn more about these aspects, and we can help — often by passing on our observations or bringing families together to learn from each other.
Our Summer School showed this. In September, we brought together more than 60 next-generation leaders between the ages of eighteen and 30 to discuss which challenges, fears and tensions they and their families have experienced. Peter Leach, the noted family-business consultant, and Randel Carlock, professor of family business at Insead, led the two days with sessions covering the psychology of family business, the importance of teamwork and career anchors, among others. (The next Summer School is in June 2011.)
There are some obvious metaphors out there for the struggle these individuals face in attaining, retaining and enjoying the benefits a wealthy family has to offer, and Randel’s video of a crisis on Everest caused by storms in May 1996 picked up one of these. Planning to reach the summit, managing your risk on the way up, enjoying the view from the top, avoiding the crevasses — they all fit well. This actually works for both the individual within the family and the family itself — while the individual needs to reach the top, the family already has; how do you reconcile the pressure that creates on the younger members?
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In a recent KPMG study of the next generation of family-business owners, the desire to move into the family business and to take it to the next level was clear, with two-thirds agreeing with both propositions. This means opting out is not an option, and it begs several questions: Which goals are important to me? How do I make my own mark? And most importantly, how do I create an identity of my own? Others, who have enjoyed the fruits of labour without considering the labour, may ask what the point is when life has conspired to take them far without any effort.
For many there is a strong desire for personal success and credibility. This motivation will undoubtedly have been reinforced through a clear and considered investment of time bestowed on the next generation by families keen to ensure their future success.
This desire for success needs to be balanced by the need for an open and honest environment, as few business leaders will be willing to pass on a successful enterprise to a less-than-capable child when they have striven to develop their business vision. Addressing such concerns and seeking to provide support and training will make the family team stronger and much more successful. This same approach to teamwork and leadership should also be applied to the challenges presented by the commercial world.
The next generation have often benefited from high levels of education and it is now commonplace to enhance this by seeking broader knowledge from institutions offering specific training on the issues faced by family businesses. Eighty per cent of respondents in KPMG’s poll said that they have had work experience from outside the family business. In today’s world of frequent diversification and cross-border trading, a wide experience base is often crucial.
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Organisations that have reached the second or third generation are often at the stage of international expansion. With fluid movement of individuals around the globe, this presents an exciting (or daunting) challenge to the generation coming through now. Add to this the shift in global wealth and trade and power, and there’s another layer of difficulty (or opportunity).
One thing clear from the survey was that just being in a family with a successful business gives a greater degree of business and commercial awareness; by being surrounded by business acumen, the next generation absorbs lessons without even knowing it. This entrepreneurial spirit permeates both family and business life, and when harnessed and refined properly, it benefits everyone.
If you would like details about KPMG’s 2011 Summer School, register your interest at kpmg.co.uk/summerschool
