The report, titled “Unleashing Legacy – A Path to Growth Excellence in Family Businesses,” surveyed 2,683 family business CEOs across 80 countries, regions and territories to explore the nature of legacy in today’s world and how family businesses can leverage legacy for sustainable competitive growth into the future.From its findings, the report examined the components of legacy, including material, biological, social, identity and entrepreneurial.
Carmen Yan, National Head of KPMG Private Enterprise, KPMG China“Finding a way for tradition and innovation to coexist is one of the most common challenges in building a lasting legacy in family businesses. Although legacy is often viewed from a historical perspective, it must be recognized that it is also an important foundation for the future as it positively impacts business performance and the family business’s impact on the environment, society, employees and sustainability of suppliers.”
Forty-three percent of respondents reported a combination of high business, environmental and social performance and a strong legacy. This confirms the strong connection between legacy and intergenerational entrepreneurship guiding family businesses’ strategic decisions and the impact they have on long-term business performance and sustainability. Among family businesses with the highest intergenerational entrepreneurship scores, 49 percent also have the highest business performance scores and 60 percent have the highest sustainability scores.
In China, 75% of family businesses are still run by the first generation. First and second generation businesses had the highest material legacy scores, but scores tend to decline as more family generations are involved in the business. This could reflect a dilution of wealth, or a shift in focus from tangible assets to intangible values, as families become larger and more complex.
In Asia, a region with many emerging economies, wealth is traditionally seen as a family inheritance. Compared to other regions, Asia-Oceania scores highest on intergenerational entrepreneurship. The region has a relatively young business age, which is consistent with the rapid economic development and entrepreneurial growth seen in many parts of the region, and where a “keep ownership and management within the family” philosophy is commonly adopted.
Peter Li, Partner, Family Advisory and Private Enterprise Practice, KPMG China“As younger generations enter the family business, some family businesses are shifting their focus from the past to the future. It’s important to recognize that the business can embrace change without losing sight of the foundation it was built on,” he says.
According to KPMG data, legacies are often strengthened by the intergenerational entrepreneurial spirit of younger generations, who speak up to their predecessors about what is important to them and encourage them to strengthen the business legacy. Younger family members are often actively involved in the business as potential successors.
Interestingly, CEO tenure is a significant contributing factor to the focus on biological heritage: in China, biological heritage (23%) is one of the most important elements embedded in family businesses. Those with longer leadership tenure tend to foster a richer biological heritage, suggesting a potential link between longer leadership tenure and fostering family continuity.
However, biological heritage scores are notably lower for female family business CEOs compared to male CEOs, suggesting that they may prioritize other elements of heritage, such as corporate social responsibility and innovation. Notably, survey data indicates that the positive impact of heritage on sustainability is stronger for family businesses led by female CEOs than male CEOs. Some female leaders value community success over personal or biological heritage, focusing on employee well-being, community engagement and environmental sustainability as part of their legacy. Among the regions featured in the report, China has the highest proportion of female CEOs in family businesses.
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