- The pandemic has forever changed how family businesses operate. Business as usual is no longer an option.
Driving growth to secure the stability of the business and the family is the common generational goal.
To secure sustainable growth, NextGens can help accelerate changes across the business, family and wealth dimensions.
Four steps NextGens can take today to demonstrate that the business will thrive in your hands.
Family businesses have experienced a pivotal shift after weathering through the impacts of COVID-19. While the pandemic caused a “perfect storm” of factors exposing businesses’ vulnerabilities, it also revealed a silver lining. According to PwC’s NextGen Survey 2022: Asia Pacific and ASEAN highlights, the pandemic brought family business generations closer together around a common purpose - to drive growth to secure the stability of the business and the family.
The past two years also saw more NextGens stepping up in their roles within their family businesses. In the same survey, 43% of NextGen respondents in Asia Pacific feel more committed to the business than they did prior to the pandemic and feel their personal involvement in the business has increased.
Today’s business environment is far more challenging and complex. When business as usual is no longer an option, NextGens must have the foresight to lead the way in driving change.
Key NextGen issues were discussed during a panel session at a recent launch event for “PwC’s NextGen Survey 2022 Asia Pacific and ASEAN highlights” report. This hybrid gathering was hosted by Ng Siew Quan - PwC Asia Pacific Entrepreneurial and Private Business Leader and Partner, PwC Singapore and Lim Kexin - Tax Partner, Entrepreneurial and Private Business, PwC Singapore. Prof. Kenneth Goh- Professor and Academic Director, Business Families Institute, Singapore Management University moderated the session with regional panellists: Alvin Gozali - Managing Director, Putragaya Wahana - Thamrin Nine (Indonesia), Sabrina Chong - Head, Corporate Development, Luxasia Group Pte Ltd (Singapore), and Phakkraphat (Beau) Limprana - Executive Director, Nguan Soon Group and Spice Story Company (Thailand) - all of whom are members of the PwC Asia Pacific NextGen Club
Be the future leader your family business needs
To build on the legacy of previous generations and secure the family’s continued prosperity, NextGens can help accelerate changes across the business, family and wealth dimensions by assessing the following themes.
Ensure business growth
Double-digit growth is key to keeping family wealth at a constant level as the family expands through the generations. It is not surprising then that 71% of our NextGen respondents in Asia Pacific put business growth as their first priority. However, delivering the above rate every two to three years in a rapidly changing business landscape isn’t easy. NextGens will need to push boundaries and challenge the status quo. Only then can they develop their own blueprint for success.
Growth and sustainability - According to PwC’s Family Business Survey 2021, Environmental, Social and Governance (ESG) has gone from a “nice-to-have” feature to a critical business imperative. Embedding a strong ESG strategy demonstrates your family’s commitment to sustainable practices, which can further engender trust and lead to potential new opportunities.
It is time to take specific action. NextGens need to understand and account for how performance on various ESG dimensions may create or erode value. And this means applying an ESG lens to business strategy and operations.
“Think out of the box. Push the boundaries. When it comes to implementing ESG initiatives, be critical, do your own research to understand the (ESG) baseline (in your respective territory). By doing so, you will avoid the trap of listening and doing what other people tell you.”
Alvin Gozali Managing Director, Putragaya Wahana - Thamrin Nine (Indonesia)- Technological advancements - Even though technology is advancing rapidly, only 12% of Asia Pacific NextGens emphasise cyber security and privacy as a priority for their family business. Given the rapid increase in digitalisation, it is crucial to protect your digital assets and plan for counter measures to combat any data attacks. As Kexin shared:
“Cybersecurity has definitely risen in importance in the last couple of years. With increased use of technology, the risk of breach is higher. And with that, cybersecurity is one of the agenda items (whereby) both growth and protection have come up as a bit of a balance from our survey.”
Maintain family cohesion
A united family, supported by strong values and governance, underpins growth. Our 2022 NextGen survey shows the pandemic has urged more direct intergenerational discussions on scenario planning and visions for the future. Continuing to have open dialogue on the topics such as those below will ensure the family’s values are nurtured and passed on whilst the family business undergoes sustainable transformation.
Succession planning: One of the ways to build confidence between both generations and align the intergenerational values is through robust succession planning. According to our survey, communication has increased. Siew Quan shares:
“This provides a good basis for a new generational contract. It’s timely to flesh out succession plans - define the leadership skills required to deliver growth in the future, the key benchmarks on the route to succession, and what NextGens must do to demonstrate they are ready to take the reins.”
Bridging the family gender gap: In order to succeed sustainably, family businesses can also widen the diversity of their thinking. A quick win is by looking at the roles of male and female NextGen members as men and women bring different qualities to the business. This is the case for Nguan Soon Group, a household spice and herb brand in Thailand. Phakkraphat (Beau) highlighted that gender isn’t the main factor when it comes to holding the top position in their family business.
“(For our family), men or women can be top management so long as they are open-minded and appreciate the different ways of thinking. My brothers and I are the 4th generation to run the family business which my great grandfather started 70 years ago. Our working styles complement each other - I focus on the details while my brothers look at the big picture.”
With more women NextGens assuming larger roles in key priority areas within their family businesses, it is vital that these women leaders have a strong support ecosystem. The introduction of PwC’s NextGen Women Leaders’ Club aims to provide that by bringing NextGen women in ASEAN family businesses together to reimagine women leadership.
Preserve future wealth
Creating double-digit growth is vital when setting the future business growth agenda. As highlighted in PwC’s Global NextGen survey 2022 report, wealth management and the following three elements of ownership competence must go together to achieve the right level of sustainable growth.
What is owned: how owners combine resources to create value today and in the future.
How it is owned: setting family governance, choosing leaders and managers, and providing incentives to maximise value creation.
When it is owned: timing of ownership decisions, such as succession planning and the staging of investment.
Over time, many families start to earn more than they can manage. Coupled with today’s pervasive uncertainties and disruption, professionalising is now a necessity, rather than a luxury. Hence, the rise of family offices in recent years has become more prevalent to better manage personal wealth and family cohesion.
Earning the right to challenge the status quo
Longevity, prosperity and success do not happen by chance for multi-generation family businesses. As leaders-in-waiting, NextGens will be accountable for ensuring the positive continuation of their family’s legacy - and they can’t do it alone. That is why it takes a community of solvers; people coming together with different skills to deliver success.
The transformation journey of Luxasia Group Pte Ltd illustrates the power of this community of solvers as Sabrina Chong explains:
“Less than a decade ago, Luxasia was a beauty distributor that operated primarily offline. Today, we are an omnichannel distribution platform for beauty and luxury brands across 15 markets in Asia Pacific. This would not have been possible without the open mindedness of my father to make the bold decision to invest ahead – in critical enablers such as technology and more importantly, in top professionals to transform the organisation. Looking back, I am grateful that we made those decisions as a family and it has been a privilege for me to be working alongside the team in the transformations.”
In order to demonstrate that the company will grow across the business, family and wealth dimensions, below are four steps you can take to help accelerate change:
Reimagine business success and build the foundations for sustainable growth by taking a lead in building an ESG strategy.
Don’t be afraid to take a different path in your journey to transform your family business and shape the future.
Articulate and negotiate a new generational contract so that everyone understands what is expected as the leaders of tomorrow, within a defined time frame.
Hone your leadership skills because leadership today requires a different set of capabilities and a new breed of leaders.
Now is the time for you to engage with the current generation to reimagine success. NextGens are on their way to becoming the future leaders their family needs.
Underpinned by our global strategy - The New Equation, PwC helps family businesses build trust and deliver sustained outcomes across Asia Pacific. We understand that NextGens play an important role in building on the current generation’s legacy and driving long-term business growth. PwC is committed to supporting them on their journey to success – every step of the way. Our on-going effort also includes the Global NextGen Survey - a unique and unprecedented two-year global study.
