How Canada’s next generation of family business owners will make their mark

The entrepreneurial spirit, community commitment and focus on long-term strategic thinking common among family businesses are important assets for NextGens as they work on these priorities. Here are some of the ways these inherent strengths of family businesses can be used to advance NextGens’ ambitions:

Investing in innovation, research and development

Many Canadian NextGens are joining their family businesses with advanced degrees—30% of our respondents have an MBA, EMBA or other master’s degree—and a desire to put the ideas and concepts they’ve cultivated at school into action. Nearly four in ten (38%) plan to engage in innovation, research and development investments at their family business—the most commonly cited priority.

We’re seeing family enterprises successfully harness these fresh perspectives through internal incubators that allow NextGens to experiment with new ideas without disrupting the focus of their core business. This also helps family enterprises uncover new growth opportunities and allows NextGens to gain valuable experience while building their own reputation. In many cases, the current generation of family business owners support NextGens through dedicated incubator funding and non-financial assistance such as connecting them with members of their professional network.

Sustainability investments

Purpose-led family businesses traditionally gained a competitive edge through their environmental, social and governance (ESG) performance. But we’re seeing signs family businesses are ceding that advantage. Research¹ shows the market value of family businesses around the world has dipped below that of similar publicly listed companies over the last decade. One of the key reasons could be that listed companies, pushed by investors and public pressure, are putting a higher priority on ESG.

Against that backdrop, it’s no surprise that half of Canadian NextGens say their family business is moving too slowly on sustainability and needs to do more. And it’s encouraging that 35% plan to work on increasing their family business’s focus on investments for sustainability and impact. One of their challenges will be to help the current generation of family business owners understand how ESG can contribute to their company’s bottom line. We’re currently seeing a generational gap: while 56% of NextGens see an opportunity for their company to lead the way in sustainable business practices, only 50% of the current generation feels the same way. NextGens can build a business case for additional ESG investments by showing how sustainability creates value by helping to secure customers, attract and retain employees and lowering the cost of capital. This is an opportunity for NextGens to demonstrate their leadership and expertise while making a lasting positive impact on their family business and wider community.

Adopting new technologies

Relatively few family businesses feel confident about their use of technological tools and systems. Only 53% of NextGens and 41% of the current generation believe their company has strong digital capabilities. It’s a perspective NextGens are keen to change: 35% say they plan to be actively engaged in their business’s adoption of new technologies.

Free of the short-term pressures of the quarterly reporting cycle, family businesses can make technology investments as part of a strategic approach to managing costs and reorganizing for growth. By finding opportunities to automate lower-value manual tasks, family businesses can free up their employees to focus on more engaging and strategic work that makes the most effective use of their skills. This can fuel business growth as well as help attract and retain staff by creating more meaningful employee experiences.

Talent management

In a tight labour market, family businesses—like all enterprises—are looking for ways to gain an edge in the competition for top talent. Nearly three in ten (29%) NextGens say they expect to be involved in attracting and retaining employees at their family business. NextGens have an important role to play through modelling professional talent management practices in their own career progression. NextGens with clear job titles, well-understood responsibilities and appointments that commensurate with their expertise can help talented non-family employees see career growth opportunities for themselves within the business.

Canadian NextGens believe they’re approaching this issue from a position of strength. In our survey, 85% of NextGens say those running or overseeing the business have clear roles and responsibilities. That’s a good start. NextGens can further professionalize the dynamics of their family enterprise by articulating the scope of their work, developing personal performance metrics and drafting training plans that will help them gain the experience necessary to assume more senior roles within the business.

Turning ambitions into lasting success

With the priorities of NextGens coming into sharper focus, it’s time to lay the groundwork for turning these ambitions into action. Building mutual trust through open communication and professionalized business practices is an important first step in making sure NextGens’ initiatives lead to lasting success.

As you explore your own business priorities, we invite you to join us and other like-minded professionals to exchange ideas, share experiences and determine a new leadership style—one that learns from the generations that came before, but is distinctly your own. Learn how the NextGen Connect program fosters collaborations between motivated individuals on the projects and initiatives they care about most.

^{1 David Bain, “Family businesses fall behind non-family companies on ESG and lose their trust premium,” Family Capital, published September 16, 2021, https://www.famcap.com/2021/09/exclusive-research-family-businesses-fall-behind-non-family-companies-on-esg-and-lose-their-trust-premium/}