The ranks of next generation family business leaders are swelling in Asia and beyond, with some 680,000 individuals with a net worth of at least US$5 million expected to pass on wealth to their heirs by 2030.¹ This unprecedented inter-generational wealth transfer—which represents almost one-quarter of the world’s wealthy population—is happening as a growing number of budding entrepreneurs are minting new fortunes by disrupting the status quo with innovative offerings.
Most of these young entrepreneurs are tossing out the rule book to find new areas of growth and novel ways of generating value. This often involves leveraging digitalization to drive performance, while maintaining a focus on sustainability to ensure business resilience and longevity.
Among wealthy clans, potential second and third generation members keen to run their family’s traditional businesses are few and far between. Across industries from real estate, trading and manufacturing, these new breed of business leaders aim to transform their existing businesses to create a legacy of their own, one that more accurately reflects their values and vision.
“The new generation is quite different from the patriarchs and the matriarchs who founded the family business,” says Kam Shing Kwang, CEO for Asia Private Bank and Vice Chair for Greater China Investment Banking at J.P. Morgan. “They have their own style of leadership, unique view of wealth and legacy, and the competitive environment they operate in today differs greatly from their parents’ time. Next-gen members who assume control of their family businesses today are keen to stamp their own personal character on the business. They want to be seen as leaders in their own right.”
However, pivoting a successful enterprise, often with a long history, requires the support of the existing team within the organization, and fresh talent who have the skillsets to drive change. Simply put, next generation leaders must not only find ways to gain the trust of long-time corporate leaders, but also seek out external executives amid increasing competition for the best and brightest across industries and geographies.
Preparing for Transition
A major obstacle facing next-gen leaders is the continued involvement of the previous generation even after handing the reins to their heirs. Understandably, there will continue to be a high level of deference to the patriarchs and matriarchs of the family business, even after they step aside. While it’s useful for the younger generation to consult the old guards on matters pertaining to the business, an overreliance on their predecessors may undermine the authority of the new leader.
To overcome this issue, the family should clearly identify and articulate the accountability and responsibilities of incoming leaders. The previous generation should also stay within the boundaries of an advisory role as much as possible. Until this happens, the lines between the generations will be unclear, leading to frustrations and possibly inter-generational conflicts.
The long-term success of a family business requires striking a delicate balance between honoring tradition and embracing change. Therefore, it is important for patriarchs and matriarchs to discuss plans with their children for modernizing the business while not disregarding the family’s core values. One way to achieve this is to involve next-gen family members in the day-to-day business operations well before handing over control.
Proving their Worth
Despite their best efforts, however, some next-gen leaders may find it difficult to convince their parents to hand over full control. One solution is for potential leaders to run one aspect of the business to showcase their leadership skills, before assuming control of the entire enterprise.
For instance, next-gen entrepreneurs could establish a new business line, seek to improve the performance of an existing one, or even manage the family office. If successful in these endeavors, the heirs can earn the trust and respect of not only their parents, but also their employees.
Furthermore, Kwang believes that communication is the key to winning over employees. “Don’t be afraid to over communicate and share with your people what you are like, what your expectations are, your visions and your strategies, so that your team knows exactly where you are coming from.”
She also advises new leaders to be humble and empathize with employees, helping them achieve their goals whenever possible. “I often ask my team ‘How I can help?’ And if you’re able to help them solve some of their problems, you gain trust and credibility. At the end of the day, if you’re the leader, you have to demonstrate that your team can rely on you as much as you on them.”
Attracting the Right Talent
With technological disruptions becoming the norm for many businesses, organizations will need to regularly acquire new skills and knowledge to succeed. This is even more crucial for family businesses moving into new sectors or seeking to transform the way their companies operate.
To attract the right talent, new leaders must clearly articulate their company’s vision and values. This is especially important when hiring younger employees, as they tend to look up to leaders whose values are aligned with their own.
“It’s important for an organization to be visible, so that people know what you stand for,” says Kwang. “At J.P. Morgan, we have a distinct culture and values that mostly only people within the firm know. So we’ve decided that we need to come out and articulate our values to our existing and potential clients, as well as prospective employees. This will help especially in attracting younger talent who want to work for an organization with similar values to their own.”
For instance, the bank has made its stance clear on climate change by declaring its intention to become carbon-neutral by 2030, and to help companies on their own journeys towards that goal. J.P. Morgan’s employees are also given the opportunity to spend up to three months abroad working on charitable projects that help to bring about positive social change.
“These efforts help employees feel that their values and the organization’s are aligned, and that this is an employer that can help them realize their personal goals,” says Kwang.
Designing effective compensation and incentive programs is also important to attract and retain employees, especially if the business is pivoting to new areas or changing their processes.
When compensation is based on meritocracy and is managed carefully, it aligns people’s behavior with the company’s strategy and generates better performance.² “When it’s managed poorly, the effects can be devastating. For example: the loss of key talent; demotivation; misaligned objectives; loss of client confidence and poor shareholder returns.”
Furthermore, companies must implement training and development initiatives to ensure that the skills and career progression of their employees remain relevant.
Kam Shing Kwang, CEO for Asia Private Bank and Vice Chair for Greater China Investment Banking at J.P. Morgan says,
“The new generation is quite different from the patriarchs and the matriarchs who founded the family business. They have their own style of leadership, unique view of wealth and legacy, and the competitive environment they operate in today differs greatly from their parents’ time. Next-gen members who assume control of their family businesses today are keen to stamp their own personal character on the business. They want to be seen as leaders in their own right.”
Amid a fast-changing business landscape, innovation and agility have become key competitive advantages for companies. To succeed, next-gen leaders will need to foster a culture that promotes these attributes.
Kwang advises rewarding employees who are stepping up to drive innovation within the organization. “One way you can encourage innovative thinking is to prominently recognize people who have contributed to innovation,” she says. “This will help inspire others to think out of the box [to come up with] different ways of working. It’s also important that you give employees the time and space away from their usual work to work on projects that help improve performance.”
Next-gen leaders should also strive to adopt best practices gleaned from the experiences of other businesses, or by engaging external advisors or mentors. Through an annual initiative called the FLEX program, J.P. Morgan provides next-gen clients an exclusive platform to exchange ideas and network with their peers as well as access to expert advice.
The bank, in partnership with 6E Capital, has also created a special event series called E+ Circle that brings together industry veterans, financial advisors and entrepreneurs to network and exchange views and insights on topics such as growth, innovation and leadership. Kwang advises next gen leaders to be open to soliciting support from external parties, which could help develop a more dynamic and innovative organization.
“We like to play a role in helping the next-gen because we want to make sure they are aware of all the opportunities as well as challenges ahead and that we are here to support them with the right network and solutions, just as we have done with their parents,” she says. “So we spend a lot of time thinking about how we can help them chart their unique path forward.”
SUPPORT FOR NEXT GENERATION LEADERS
J.P. Morgan offers its next generation clients a number of programs that aim to advance their learning and development.
Tsinghua University School of Economics and Management:
J.P. Morgan partnered with Tsinghua University School of Economics and Management on two programs designed to develop next-gen leaders.
In the first program, J.P Morgan specialists and MBA students from the School of Economics and Management worked jointly on consulting projects. With the bank’s specialists serving as mentors to the students, the aim of the program was to promote a two-way exchange of ideas and skills.
The second program was a classroom partnership with the Tsinghua YES Program that focused on family succession, with the aim of preparing the next generation of Chinese business leaders.
Every year, J.P. Morgan offers summer internships that provide penultimate year students with on-the-job training and experience.
They will attend senior speaker events, skills-building workshops and networking opportunities. Interns who complete the program may receive an offer of full-time employment.
E+ Circle – Entrepreneurs & More:
An exclusive invitation-only platform for next generation business leaders and entrepreneurs created by J.P. Morgan in partnership with 6E Capital. The initiative features a series of special events that bring together industry veterans, former C-suite executives, financial advisors and entrepreneurs to network as well as exchange views and insights on topics such as growth, innovation and leadership.
This intimate and private forum addresses top-of-mind questions to build businesses and improve performance through achieving operational excellence, talent, financial, capital management and innovation.
J.P. Morgan offers an invitation-only summer event series designed to equip next generation participants with the necessary skills to be effective leaders. Featuring internal and external speakers, topics of interest range from sustainable investing to blockchain and digital finance.
1. Wealth-X Family Wealth Transfer Report 2021. Data as of 2021.
2. Harvard Business Review. Data as of January-February 2021.
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