The generation gap is becoming a generation canyon

Australian family businesses are facing a widening gap between generations and it’s making succession more difficult than ever before.

According to new research from PricewaterhouseCoopers, 86 per cent of Gen Y working in the family business have big plans for when they take over and 80 per cent have ideas for change and growth such as introducing new products, investing in new technology, exploring social media or changing the way the business operates.

But most of them (64 per cent) think their parents will have trouble letting go of the business. Also, 88 per cent say they have to work harder than anyone else because of perceived nepotism, the view that they only got the job because of their name.

The ‘sticky baton’ syndrome

PwC's private clients team national managing partner, David Wills, calls it the “sticky baton syndrome”. Of course, there is nothing new about generation gaps in family businesses, they go back centuries. But what makes it different now is that the boomers are living longer. They are choosing to stay longer in the business, which means the succession points are widening. And they tend not to want to let go, which makes this period of transition unique.

Getting older and going nowhere

Sue Prestney, a partner with PwC’s private clients team, says the study highlights tensions now confronting family businesses.

“The report makes the point that we have got this big generation gap now where you have got people living longer, holding on longer, and you’ve got the business life cycles and product life cycles decreasing and the technology moving so fast that the baby boomers can’t possibly be on top of it the way Gen Y is,” Prestney says.

“You have Gen Y at one end, needing to innovate, but the baby boomers being even more entrenched and older. You once would have had the tension between parents and children, you’ve probably now got it between parents and grandchildren because of the age the baby boomers.

“I can’t see it easing up. The technology is going too fast, the people at the other end are going to live longer so this is the brave new world, the new paradigm we have to work with.”

The silver spoon syndrome

Prestney says Gen Y is also under pressure because of perceived nepotism.

“Every next generation family member has that feeling. That everybody else in the business feels they only got the job because of what their name is,” she says.

“They feel like everybody else thinks they’re the beneficiary of nepotism, rather than having got there through their hard work. They all end up working harder to get over that silver spoon perception and I’m told by a lot of them that they feel isolated as a result. The people that work around them are either being overly friendly because they think that might get them somewhere or they disregard them altogether and so they feel there is no one they can talk to that they can trust. That creates psychological issues for them.”

That said, the survey found that fewer than half (46 per cent) had earned their stripes by working outside the family business.

“Just as importantly is the fact that the vast majority have had management training or an MBA or something like that behind them, which partially gets over that credibility gap,” she says.

“Even so, there is nothing better than having had some sort of success somewhere else before you go into the business.”

Platform for growth

Prestney says the big challenge now for family business owners is to work out a platform for the next generation to do their thing, say, developing e-commerce and social media strategies, while the parents keep working.

“It’s about getting that balance right between keeping them motivated and keeping the business continually innovating and keeping the baby boomers, who own it, comfortable with a feeling of safety, that they won’t lose everything they built,” Prestney says.

“There has to be some sort of negotiated platform for the business where part of it is allocated to the Gen Ys to do what is needed to do and part of it is allocated to the parents as a safety platform so they know they are going to get enough to retire on. If you have that conversation between all the generations, it should be incredibly exciting for any family.”