3. Diversification of Family Wealth and the Next Generation
Family businesses can become vulnerable during leadership transition, often due to conflict between the desire to maintain and respect tradition, and the need to adapt and progress the business in response to the changing environment.
Younger generations may have a different vision for the future, such as exploring new technology, extending the company’s services or expanding into new markets.
As businesses continue to respond to COVID-19, there is an opportunity to explore these possibilities and allow the next generation to gain valuable crisis management experience, so they are prepared should a similar situation arise in the future.
When bringing the next generation in to the business, key considerations for leaders include:
- Allowing the next generation to apply fresh ideas and skills to the business. This could make the difference between falling behind and flourishing in the current climate.
- Inviting younger family members to join the board, involving them in key decision making and communication so they can develop a clear and confident voice with stakeholders.
- Reviewing the EY Next Generation Program, designed to support the development of family members at different ages.
4. Social Impact
Family businesses, like others, are focusing further on their social and environmental impact. From how they take care of their employees during a crisis to steps they take to give back to and support their local communities, successful family businesses place a huge focus on culture, purpose and value in their operations and strategy.
In 2018 the high street retailer Timpson was awarded the Family Business Award of Excellence at the EY Entrepreneur of the Year Awards. Recognised for its creative approach to employee engagement and innovative work helping ex-offenders in the local community, Timpson was highlighted as a ‘national example of how a business demonstrates its values and social purpose’.
Framing goals, not just around the immediate family but through the lens of local communities, can often help provide owners with a clear purpose and focus for how they want to use their wealth, particularly as new leaders begin to take over the reins.
In addition, and much like every other business as they plan ahead, family businesses should be using this period to review diversification and how they are engaging with their clients and communities.
Growing the family business sustainably, whilst taking responsibility for others through philanthropic and social engagements, should be a key focus for leaders.
As Family leaders look over the horizon, they expect an increased focus on their company’s social impact and its importance for both their customers and their employees.
Research before COVID has shown that 55% of employees would opt to work for a socially responsible company, even if the salaries were lower, while 33% of consumers look for socially responsible brands. (Research: Unilever and Just Means). The impact of COVID on these attitudes is yet to be fully understood.
5. Global Mobility and Residence: Does it work for the family and the business?
With employees and businesses demonstrating the effectiveness of remote working, COVID-19 has shone a spotlight on the mobility and location of global workforces.
When lockdown began there was an initial flurry of family business owners considering whether to stay residing in the country in which their company is based or quickly relocate abroad to second homes before borders closed. For those deciding to work remotely from abroad, this raised a multitude of questions around tax and whether their company would be liable to pay taxes under various jurisdictions.
While some tax authorities have issued temporary relaxation of rules around residency and permanent establishment to facilitate those remotely working from other jurisdictions, it is still unclear whether longer-term decisions will be contemplated which would safeguard family business leaders working on a remote basis from overseas.
To help businesses keep up to date with the significant changes to payroll, tax and social security laws around the world, we have produced a Global Mobility Response Tracker