Coming home or breaking free

1 October 2015.  Family businesses face a succession problem, especially in Germany, Austria and Switzerland. In Switzerland, only 3.9% of the 100 students interviewed and whose parents own a family business want to take over the business within five years of graduation. In general, only one in 10 can imagine succeeding their parents at some point (10.4%). The numbers for Germany and Austria are very similar (4.2% and 11.2% in Germany, and 3.4% and 12.6% in Austria).

In Great Britain, the proportion of those who can generally imagine “becoming a successor” is much higher (20.9%). However, even there, only 3.9% of those interviewed say they want to succeed their parents within five years of graduation. The DACH countries are considerably below the global average of 4.9% of children of entrepreneurs with firm succession intentions within five years of graduation, and 19.8% of children who are generally willing to succeed their parents.

Succession resistance in family businesses continues as a critical trend

“We learned in our 2012 study that succession intentions among children of entrepreneurs are low”, says Prof. Dr. Philipp Sieger, the survey’s project leader. Reasons include numerous attractive alternatives on the job market (almost 60% of all children of entrepreneurs aspire to careers as an employee rather than business owner) and the wish to take their own path to entrepreneurship (more than a third of all children of entrepreneurs want to start their own business). “This shows that the reasons are not primarily the next generation’s lack of entrepreneurial spirit”, adds Prof. Dr. Thomas Zellweger, the study’s co-author. “Many children of entrepreneurs want to become entrepreneurially active, but generally not in their parents’ business.” Peter Englisch, Global Leader of the EY Family Business Center of Excellence, adds: “Entrepreneurial families face the challenge of convincing younger family members that their long-term future can lie in their business.”

“Earning one’s spurs” outside of the family legacy

Succession intentions have declined in recent years. Among students from universities who participated in both studies, a global decline in succession intentions of about 30% becomes apparent. In Germany, the decline is 46%, in Austria 31% and in Switzerland 6%.

One possible explanation for this large shift is that the alternatives on the job market were more numerous and attractive at the time of the recent survey than during the earlier one. “Also, quantity and quality are two different things”, Philipp Sieger says. Due to better and more comprehensive teaching in the areas of entrepreneurship and family business, it is to be expected that those children of entrepreneurs who explicitly want to become successors would be much better prepared and qualified.

Different succession intentions of daughters and sons

Irrespective of their subject of study, culture and birth order, daughters have lower succession intentions than sons by an average of 25%. This is even the case if the family business is in the hands of the mother. “It becomes apparent that daughters consider an entrepreneurial career more risky than sons. And sons are more convinced of their entrepreneurial abilities than daughters”, Thomas Zellweger explains.

Entrepreneurial legacy
“In general, it is advisable to let children gain experience in the family business”, Philipp Sieger says. Succession intentions are generally stronger if first insights have been experienced. The age when children first “dabbled” in the business does not matter.

It becomes apparent, however, that one can work “too much” in the parents’ business: Initially, more cumulative work experience makes for stronger succession intentions. But if there is no succession by a certain point, succession intentions weaken again. “So there is a relatively favorable time for a succession solution”, says Philipp Sieger. “But if a child of an entrepreneur is denied the actual succession for too long, this can be interpreted as a lack of trust, which makes other career options seem more attractive.”

Bild: Photocase / Mr. Nico