Family Businesses Stay Committed to Innovation, but Succession Planning Remains a Challenge

Insights from PwC’s 2019 Family Business Survey

We’re excited to release the results from our 2019 US Family Business Survey, which marks the ninth iteration of this bi-annual report. This year’s report sheds light on the opportunities and challenges facing U.S. family business and offers insights into how companies can expand current momentum into multi-generational success.

According to the latest survey, family businesses are confident about the future: 79% expect to deliver steady growth over the next two years. Compared with company performance last year, a total of 64% of leaders reported positive growth. 

Despite the positive outlook, family businesses have not been immune to the larger macroeconomic forces that are influencing the global economy. The pace of digital disruption is pushing family business leaders to rethink the tactics that helped them grow the company and prepare for the inevitability of new disruption. Of those surveyed, 52% expect they will have made ‘significant’ strides in digital capabilities by 2020. Close to half (47%) of family businesses plan to bring in outside expertise to help run the company and spur innovation.

While technology is a new problem many family businesses are solving for, succession planning has long challenged family businesses and remains an important part of achieving a long-term vision. Of the family leaders we spoke with, 62% plan to pass on management and/or ownership to the next generation, however just 18% have a robust succession plan in place. This is creating a potential business continuity risk, at a time when the pace of change has become breathtaking. This disparity between intent and planning poses the question: What steps can family business leaders take to put succession plans in place that support the long-term viability of the organization?

When we partner with clients, we advise them to undertake a series of steps, specifically:

• Develop a 3-5 Year Strategic Plan: Creating an initial short timeline often helps crystalize the need for a succession plan among leadership and family members.
• Consider Independent Directors for their Board: Independent Board Members can provide outside perspective and counsel to help guide family leaders towards creating formal succession plans.
• Prepare the Next Generation to Lead: Developing a plan that incorporates leadership and management plans, as well as what is expected of family members (for example, asking that family members spend some time working outside the organization), serves as a safeguard for business continuity.
• Identify and Address the Emotional Hurdles that Many Family Businesses Face: Thinking it’s ‘too soon’ to address succession or the family is ‘not yet ready’ to have the discussion can be challenging obstacles to overcome. Once confronted, many families find it easier to move the conversation away from an emotional decision to a practical decision benefitting both the business and family.

As 2019 unfolds, our outlook on family businesses continues to be optimistic, but challenges remain. Investing in R&D and new technologies is a must to remain competitive, but your business’ survival is at a much greater risk without a plan in place to transition it to the next generation. Bottom line: a clear vision for the future—in terms of innovation or leadership—is one of the most important endeavors a family business can undertake.