HORSHAM, PA, December 3, 2019 — Kreischer Miller, a leading independent accounting, tax, and business advisory firm serving the Greater Philadelphia and Lehigh Valley areas, today announced the results of its 2019 Family Business Survey, which was conducted earlier this year.
The survey found that a growing percentage of Greater Philadelphia family businesses have a formal succession plan in place, with most relying on the next generation to lead the business into the future. Nearly 63 percent of respondents said their companies have leadership succession plans in place, up from 49 percent when the survey was last administered in 2015. And more than 80 percent of companies with management succession plans report that those plans include family members.
But is the next generation ready and willing to take on such roles? Those currently leading aren’t sure.
Survey respondents ranked the lack of next generation talent as their most pressing concern among those listed on the survey. This lack of confidence may also be leading some businesses to delay succession planning; of those family businesses that said they have no succession plan, 34 percent identified next generation availability/readiness as the biggest contributing factor.
Yet, nearly two-thirds of the companies responding to the survey said they have no formal development and mentoring plan in place to prepare the next generation.
“The increase in succession planning is an incredibly positive development, especially since more than half of this year’s respondents say their business’s senior leadership will retire within the next five years. But that’s only half of the equation,” said Steven E. Staugaitis, a director of Audit & Accounting at Kreischer Miller and a family business specialist. “Leadership transitions are a vulnerable time for family businesses. The next generation of leaders – whether strictly family members or not – must be prepared to run the company. Livelihoods and legacies are at stake.”
Preparing the Next Generation to Lead
Because leadership development is such a critical need, it can’t be left to chance – a formalized development plan is essential, Staugaitis said.
The first step is identifying the right leadership candidates. Leadership skills – the ability to motivate and encourage people and hold them accountable – are just as important as technical competencies related to the specific business, Staugaitis said. Future leaders must also be flexible – the ability to meet the company’s needs today won’t be worth much if those needs are completely different when the future leader takes on that new role.
No matter how much potential they have, a company’s future leaders need time to develop their skills. “The most common leadership development problem that companies have is not doing anything or waiting too long to start,” Staugaitis said. “Unfortunately, the results of our 2019 survey show this is still happening.”
Some best practices in leadership development include:
- Rotating future leaders through different roles and departments within the company.
- Assisting them in achieving related advanced degrees and/or participating in educational seminars that focus on leadership development goals or needs.
- Building mentoring relationships with current leaders within and outside the company.
- Participating in next generation peer groups where rising leaders can support and learn from each other.
- Establishing an advisory board that will help guide and support the next generation of leaders and hold them accountable.
Creating a leadership development plan and providing its components takes time and intentionality. Companies may want to engage the help of outside advisors to set up frameworks, identify educational opportunities, and get the process started, Staugaitis said.
About Kreischer Miller’s 2019 Family Business Survey
Kreischer Miller’s 2019 Family Business Survey was administered electronically in the first quarter of 2019. Respondents included approximately 100 family-owned businesses in the Greater Philadelphia region, including southeastern Pennsylvania, southern New Jersey, and northern Delaware. The largest pool of respondents, 33 percent, identified their companies as second-generation family businesses. The majority of survey participants work in manufacturing, construction, information, and the wholesale trade.
About Kreischer Miller
Kreischer Miller is a leading independent accounting, tax, and advisory firm serving the Greater Philadelphia and Lehigh Valley areas. The firm is built to respond to the unique needs of growth-oriented private companies, helping them smoothly transition through growth phases, business cycles, and ownership changes. Kreischer Miller offers a wide range of services, including Audit & Accounting, Tax Strategies, Business Advisory, Human Capital Resources, and Technology Solutions across an array of industries, including manufacturing, distribution, construction, real estate, not-for-profits, media, government contracting, professional services, family-owned businesses, and investment firms. The firm provides insight and creative services to organizations that need to be able to quickly adapt and respond to changing market opportunities and challenges. To learn more, call us at 215.441.4600 or contact us.