Scottish family businesses need to tackle the transition of succession if they are to avoid the twin traps of family breaking the business or business breaking the family, a report has warned.
Research from PwC has claimed that the risks of getting it wrong have never been greater, and called on business leaders to begin the planning process immediately before the generation gap becomes a chasm.
The report, entitled Bridging the Gap: Handing over the Family Business to the Next Generation, found problems that risk putting a “spanner in the works”.
These include the gulf between the age of the business’s leadership and the next generation, which could lead to a “credibility gap” faced by young family members as they struggle to get established.
A communications gap can open up between parents and children and even in the most successful businesses, the firm added.
Family businesses across Scotland support almost one million jobs and generate around 45% of Scottish GDP, PwC said.
Caroline Roxburgh, head of private business at PwC in Scotland said: “We know that entrepreneurial family businesses plan to be in it for the long haul. Their agility in decision-making, ability to take a long-term view and reputation as a great place to work make them a vital cog in our economic engine. However, without effective planning, the transition from one generation to the other can put a spanner in the works, potentially creating division within a family business.
“The pace of change in the global marketplace, responses to new technology, demographic shifts and climate change mean the world is a very different place since the current generation of family business leaders took over.”
The firm warned that only a “tiny minority” of UK family businesses make it through to the sixth generation.
Susie Simpson, tax and private business director at PwC in Scotland, added: “Family business owners often comment that their children aren’t entrepreneurial enough or don’t put in the hours they did; when in reality, just down the hall, the next generation are keen for their parents to listen to their new ideas and embrace the possibilities of new techcnologies. This impasse – where the older generation hands over management in theory but in practice retains control – can slow down decision-making and in some cases, result in frustrations that can boil over and fracture the business.”