The business universe is evolving exponentially, new multi-billion dollar industries are rapidly emerging and old, established industries are becoming obsolete. In this rapid-paced, continually changing environment, operating with agility and a purpose-driven, innovative mindset is key to the sustained success of modern enterprises. For this reason, family offices need to look beyond the obvious priority of inter-generational wealth preservation and genuinely embrace the value that fully immersed and invested next-generation family office leaders can bring to the organization.
The reality, however, is that the majority of family businesses undergo successful transitions to next-generation leadership because this generation is often not motivated or inspired to take the reins. At some stage, a generation holding decades of knowledge and experience must be replaced by a new talent pipeline — a pipeline dominated by millennials whose loyalties are driven by a very different set of principles and priorities. Next-generation family office leaders need the support of the current leadership team to craft a space for them in the organization while building the necessary knowledge and experience to establish their own vision and legacy for the business. Here are three key areas of focus to achieve this:
Understanding The Importance Of Purpose And Impact
One of the key findings of the Deloitte 2018 Millennial Survey report was that “Millennials want leaders to more aggressively commit to making a tangible impact on the world.” This sentiment is consistent with the findings of both experts at the London Business School and PwC’s recent Workforce of the Future survey, highlighting the importance of aligned values and purpose to attract and retain the millennial workforce. It’s evident that if family businesses and family offices want to be successful in attracting and retaining next-generation talent, they must become authentically purpose-driven and consistently reflect that purpose both internally and externally.
The UBS Campden Wealth Global Family Office Report indicates that 54% of family offices have signaled intentions to increase their investment allocations to impact causes over the next 12 months. It’s not surprising then that impact investing is high on the agenda for the next generation. But, also one of the points of conflict in family enterprises due to the older generation not being fully aligned or able to embed this mindset quickly enough in the business.
Without the right tools and arguments, the principals may find the next generation’s ideas or arguments for impact investments a bit naive, however, with the proper guidance solid investment cases can emerge that align well with the family.
When families get involved in impact investing, they must be prepared to create impact and understand what they are trying to achieve through specific investments. According to Sapna Shah, The Global Impact Investing Network (GIIN) Managing Director, “All investments have an impact – positive or negative. Our Core Characteristics of impact investing give clarity on what makes an investment an impact investment, or one in which the investor has a specific objective of addressing a social or environmental challenge in addition to generating a financial return.”
Finding Identity In The Family Office Instead of The Family Business
Family businesses are becoming business offices. Many family-owned businesses are selling, and the liquid capital resulting from the actualized investments requires management by the family office. This presents a number of opportunities to next-generation family office leaders who are set on driving change, diversification, innovation and creating a new legacy. Family offices are becoming more attractive prospects to the next generation than the family’s core business. Although it is essential to maintain strong operational leadership within established companies, the more adventurous and progressive investment mindset of the next-generation could be leveraged effectively in the family office environment. For example, one of the most significant shifts seen in the family office sector is the increasing appetite for direct minority-stake investments and more active participation in the strategic management of these investments.
Desiring To Talk About It
Another unique trait of the millennial generation is the need to share what they’re doing, and this intent is evident within the business context too. Having a positive impact and building their reputation around the effect their family’s investments have is increasingly desired. This mindset can be very valuable to the family office that grasps the importance of investing time and energy into nurturing ‘the family brand’. Reputation and personal branding are becoming critical assets in the modern world of business, in response to the increasing need to connect with consumers on a more personal level. After all, next-generation family office leadership, driven by an influencer mindset, see themselves as personal brands who should only transact with businesses that overtly share the same set of values and priorities as they do. However, family offices often do not have the platforms or processes in place to effectively tackle this challenge, and this is something that could be addressed quite quickly.
The task of creating a value proposition to attract and retain the next-generation of family office leaders should be high on the agenda of all family businesses who wish to evolve and adapt to the expectations and demands of a new global community of next-generation consumers.
This post originally appeared on Forbes.