The report titled “Unlocking legacy — The path to superior growth in family businesses” surveyed 2,683 family business CEOs from 80 countries, territories and regions to explore the true essence of legacy in today’s world, and how family businesses can use their legacy for sustained competitive growth well into the future. The report examined legacy components including material, biological, social, identity and entrepreneurial from the survey results.
Karmen Yeung, National Head of KPMG Private Enterprise, KPMG China, says: “Finding ways for tradition and innovation to co-exist is one of the most common challenges in building a lasting legacy in family businesses. While legacy has often had a historical perspective, we should recognize that legacy is an important building block for the future because of the positive contribution it makes to business performance and the environmental, social, employee and supplier sustainability impact of family businesses.”
Forty-three percent of the respondents reported a combination of high business, environmental and social performance, and strong legacies — which reinforces the compelling link between legacy and transgenerational entrepreneurship in guiding the strategic decisions of family businesses and the impact they have on long-term business performance and sustainability. Among family businesses with the highest transgenerational entrepreneurship scores, 49% have the highest business performance scores and 60% have the highest sustainability scores.
In China, 75% of the family businesses are still managed by the first generation. First- and second-generation businesses had the highest material legacy scores, which tend to decrease as the number of family generations in the business increases. This may reflect a dilution of wealth or a shift in focus from tangible assets to intangible values as families grow larger and become more complex.
In Asia, where there are many emerging economies, wealth is traditionally considered to be the family legacy. Compared to other regions, Asia and Oceania has the highest transgenerational entrepreneurship score. It has a relatively younger company age profile, which aligns with the rapid economic development and entrepreneurial growth that has been seen in many parts of the region, and where the philosophy of “keeping ownership and management within the family” is commonly adopted.
Peter Lee, Partner, Family Advisory, Private Enterprise Practice, KPMG China, says: “With younger generations entering family businesses, we can see some family businesses shifting some of their focus away from the past and turning it more toward the future. It is important to recognize that change can be embraced without losing sight of the foundations that the business has been built upon.”
KPMG’s data also show that legacies are often amplified by transgenerational entrepreneurship among younger generations who compel their predecessors to communicate openly about what matters to them and reinforce their business legacies. Often, younger family members are actively engaged in the business as potential successors.
Interestingly, a CEO’s tenure is a significant contributing factor in the focus on biological legacies. In China, biological legacy (23%) is one of the most important components that have been incorporated into their family business. Those with extended leadership terms tend to cultivate a richer biological legacy, which suggests a potential link between longevity in leadership and nurturing family continuity.
However, biological legacy scores are particularly low for female family business CEOs compared to their male counterparts, which suggests they may be prioritizing other elements of legacy, such as corporate social responsibility or innovation. Notably, the survey data indicates that the positive impact of legacy on sustainability is stronger in family businesses led by female versus male CEOs. Some female leaders may value communal success over their individual or biological legacy, leading them to focus on the well-being of employees, community engagement and environmental sustainability as part of their legacy. Among the regions covered in the report, China has the highest percentage of female CEOs in family businesses.
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