With origins as a family business and more than 130 years of experience supporting enterprising families, Julius Baer knows firsthand the importance of intergenerational alignment and dialogue. “Wealth can unite families. And it can divide them as well. We have seen the importance of families building upon commonality, unity and success,” says Christian Gattiker-Ericsson, Head of Research at Julius Baer. “Whether it’s governance and how family leaders endure changes in the family enterprise, or agenda setting and leadership alignment, it’s important all generations talk early on what matters the most to them”.
For this reason, a one-year study on generational alignment in family enterprise was recently completed by 12 academics, analysts and consultants from six reputable international institutions with the support of Julius Baer. Jon Martínez, Full Professor and Director of Centro de Familias Empresarias ESE Business School at the Universidad de los Andes, was one of the lead researchers. “We wanted to examine the interests, beliefs and roles held by different generations, including the challenges the older and younger generations foresaw for their family business,” he explains. “The results were pleasantly surprising. Older generations, those above 40, and younger generations, those between 18-40, are more aligned than anyone ever expected. This could be because all generations are currently exposed to a high level of uncertainty, dramatic changes in society and extremely fast technological changes. The study also took place during the COVID pandemic, which may have united generations more than before.” The findings are summarized in the nine points below.
1. Family first: all generations prioritize their family and its enterprise.
Family was the top-rated interest by all generations surveyed, with younger generations also displaying a strong interest in family enterprise. This is notable as it challenges oft-assumed correlations between interest and age. In fact, younger members incorporate family business into their identities, aspire to wide-ranging (operating and governance) roles in enterprise leadership and are actively preparing to take the reins. They also expect the transfer of practical knowledge from older generations, who fittingly place importance on transferring values, principals and work ethics to their juniors.
2. A united front: alignment on business agendas and goals.
Here alignment is encouraging as generations must team up to define a common vision and strategy for their business. Young and old alike prioritize the UN Sustainable Development Goals, specifically economic development and the provision of employment. Somewhat surprisingly, younger generations are less focused on the environment, focusing instead on digital transformation, sustainability and professionalism as business areas requiring strategic change.
3. Does philanthropy need a make-over?
Philanthropy underpins the legacy of many enterprising families, serving to unite members and create meaning beyond wealth generation. It stands out, therefore, that younger-generation members, particularly males, are less interested in philanthropic giving. A new understanding of social responsibility and how to implement it seems to be arising and, as this goes beyond traditional philanthropy, requires intergenerational alignment. Philanthropic approach also varies by country and company size, reflecting cultural, legal and tax differences and the impact of size on a company’s capacity to give.
4. Closing the gender gap: it’s time to prioritize women in leadership.
Across both younger and older generations, women report being less engaged and less interested in their family enterprise than men, with women in most countries aspiring less to senior executive and board roles. This is largely due to them feeling less prepared than men to assume roles with greater responsibility. On the other hand, women express more interest in family, giving and caring for the environment than men. While trends vary per country, demand for workforce diversity is growing globally, as are the numbers of women business owners. All these facts encourage family enterprises to review how they are actively engaging and raising the interest of women family members.
5. Parenthood strengthens connection to the family business.
Family members with children identify more with their family enterprise, emphasize philanthropic giving and see less need for business transformation related to professionalization and digitalization. It seems older enterprise members with children have more of a stewardship mentality aimed at perpetuating the business and its positive impact on the broader community. They may, therefore, be more resistant to change when presented with new ideas from the younger generation.
6. A point of difference: development agendas.
Both generations agree that younger family enterprise members need to develop practical business knowledge and leadership skills. While older generations emphasise the modelling family values and culture, their younger counterparts would appreciate greater receptiveness to new business ideas and the importance of soft skills.
7. Younger generations are less interested in systems of governance.
Younger generations are less interested in family council roles than those related to running and governing the business. This highlights a potential need to create and promote interest and opportunities for involvement in this space, though family governance is more developed in some countries than others.
8. Executive presence: younger generations need to be prepped for leadership
Younger family enterprise members feel prepared for and aspire to business governance roles more so than managing roles. It could be that families don’t promote – or actively limit – family participation in executive management roles in the company. If no limits are placed on family participation, the results suggest a need to engage interest in and promote the preparation of crucial family enterprise leadership roles at the executive level.
9. Trends are global, yet country-specific differences exist.
There is a high interest in family and family enterprise worldwide and the key takeaways discussed above largely hold true across regions. The study focused on countries that are both dynamic and diverse, namely Chile, China, Mexico, Spain and the United States, yet the results reflect input from close to 40 countries. While detailed country-based analysis is available, it’s interesting to note the results of Chile, as family companies account for nearly 90% of the business landscape and have significantly contributed to the country’s economic and social success. “After a long period of economic growth that saw Chile become the first South American nation to join the OECD, the country has seen its economic growth drop in recent years alongside social unrest and the impact of the COVID pandemic. This is reflected in the survey’s results, which saw Chilean respondents with children point out the impact of political and social uncertainty on family enterprise,” says Beatriz Sanchez, Region Head Americas Julius Baer. “While the overall country results are more conservative, for example gender differences are higher than in other countries, the country cannot rely on traditional approaches and must stay on top of current trends and market demands to ensure that family enterprise remains an economic backbone.”
At Julius Baer we welcome the confirmation that younger generations are highly entrepreneurial in their mindset and eager to get started in their family business. We know the benefits associated with solid foundations, which is why we encourage our clients to set their enterprise up for generations to come by emphasizing joint family philanthropic ventures and Family Governance. The holistic approach younger generations display is admirable and can be beneficial for their family enterprise, yet it must not dismiss the wider role played by philanthropy in uniting families on their values and in creating meaning beyond wealth. As Guy Simonius, Head of our Family Office, explains: “It’s vital that younger generations also appreciate and are involved in the laying of a solid family business foundation. Learning to prioritize long-term success over quick-wins is part of this and, given the current culture of instant feedback and change being only one click away, this element will be an increasing challenge. It may sound old fashioned, but Rome was not built in a day and there’s a reason why solid foundations are required if a family enterprise is to last”.