Family Business Legacy: New Directions for Research and Practice
Family businesses are often characterised by a long-term vision, resilience, and deep-rooted values. Legacy plays a central role in shaping the identity of family firms, capturing the values, traditions, and entrepreneurial spirit passed down through generations of business families. According to Family Business United, legacy refers to the “family’s values and vision, inspired by the past, that guide and support the business’s underlying mission for the future”. A report from STEP Project Global Consortium (SPGC) and KPMG Private Enterprise (Unlocking Legacy – The Path to Superior Growth in Family Businesses) uses new research to examine how family businesses can harness their legacy to drive sustainable growth. This article summarises the key findings from the report and draws out some of the implications for family firms in the UK and research in the field.
The study sought to learn more about family business legacies and how they affect long-term business performance and sustainability (Calabrò & Langsford, 2024). The study included a survey of 2,683 family-business CEOs from 80 countries, which took place in late 2023. The survey population included firms from diverse industry sectors, with respondents coming from Europe, the Americas, Asia, and the Middle East and Africa. These firms had an average age of 42 years, reflecting their maturity and resilience across various business cycles. Following the survey, four regional roundtable discussions were held with 21 business family leaders and next-generation members with the aim of developing a deeper understanding of the role of legacy in family businesses.
The report explores the "legacy paradox" in family businesses—while legacy can be an asset, providing identity and inspiration, it can also become a liability if it is too entrenched in tradition, becoming an obstacle to adapting to change and innovation. Five legacy components were identified in the study: material, biological, social, identity, and entrepreneurial—each of which plays a role in shaping outcomes in family firms:
(1) Material legacy
This includes tangible assets such as family wealth, heirlooms, and property. The survey found that material legacy tends to be stronger in first- and second-generation businesses, but its influence diminishes as family businesses grow more complex over generations.
(2) Biological legacy
This refers to the family name, bloodline, and the involvement of family members in the business. Companies with strong biological legacy scores often prioritise family continuity, but the report noted that female CEOs tend to place less emphasis on biological legacy, focusing instead on areas like corporate social responsibility.
(3) Social legacy
Social legacy emphasises community engagement and the family’s impact on societal well-being. Family businesses in the Middle East and Africa scored highest in this area, reflecting a cultural emphasis on collective well-being and social responsibility. Social legacies are also correlated with strong sustainability practices in these regions.
(4) Identity legacy
Family businesses with strong identity legacies often integrate their family stories, values, and rituals into the business. This was particularly prevalent in Europe and among older, multi-generational businesses.
(5) Entrepreneurial legacy
The roundtable discussions highlighted the importance of entrepreneurial legacy, where families focus on maintaining the entrepreneurial spirit of the founders. Businesses with strong entrepreneurial legacies reported higher business performance and sustainability outcomes; for example, the study found that 44 per cent of respondents with high legacy scores reported superior business performance, compared with only 23 percent of businesses with low legacy scores. Similarly, businesses with strong legacy scores demonstrated a higher commitment to environmental and social sustainability.
The SPGC/KPMG study points to some promising areas for future research—these include, for instance, questions about the role of legacy, gender, and sustainability in UK family-business success.
First, the legacy paradox - balancing tradition and innovation
The legacy paradox highlights the challenge of balancing tradition and innovation, particularly in older multi-generational firms. While legacy can be a source of pride and stability in family businesses, it can also hinder innovation. The challenge here is to find ways to preserve core family values while also embracing new technologies and developing business models that help firms stay competitive amidst rapid change. This legacy paradox may benefit from new research—for example, how do family businesses in the UK effectively balance tradition with innovation? Further research could focus on understanding how UK family businesses navigate this paradox and identify the factors that influence how legacy impacts business adaptability and success.
Second, ensuring continuity of entrepreneurial legacy
Another challenge, particularly for older, multi-generational family firms, is how to preserve entrepreneurial legacy and the innovative spirit of the founder; for example, how do UK family firms nurture and cultivate entrepreneurship across generations to maintain business agility and the agility to adapt to rapid social, economic, and technological change? This might involve, for example, encouraging younger family members to develop new ventures or diversifying the business to help ensure longevity and growth. In the UK context, where family businesses contribute significantly to the economy, sustaining this entrepreneurial mindset is one of the keys to enduring competitiveness.
The Family Business Research Foundation’s own research on next generation engagement identified best practice for business families and the pitfalls to avoid when seeking to involve the next generation in the family business (Howorth et al., 2016). Building on this previous work, new research could look at the factors that enable or hinder the transmission of entrepreneurship from one generation among UK family firms.
Third, social and environmental sustainability
The report underscores the importance of social and sustainability legacies. UK family firms, particularly those aiming to align with the Environmental, Social, and Governance (ESG) agenda, can potentially benefit by embedding social responsibility and sustainability into their business strategies.
Working in partnership with researchers from Lancaster, Leicester, and Loughborough Universities, the Family Business Research Foundation is currently delivering research in this area—to understand how family firms in the UK are currently approaching ESG, how and to what extent they embed ESG into their strategies and operations, and what benefits, risks, and challenges they face in doing so. It is hoped that the learning from this project will stimulate new research on ESG in family businesses and the development of new practice guidance tailored to the specific circumstances of family businesses in the UK.
The findings from the SPGC/KPMG study suggest that family businesses that integrate strong social legacies tend to outperform others and point to a possible relationship between a family business's commitment to sustainability and its performance. This calls for more research to understand how family businesses can leverage their legacies to enhance their environmental and social impact. Future research could also explore the role of family firms in promoting sustainable business practices and how their legacy influences long-term environmental stewardship.
Fourth, gender dynamics in family business leadership
The findings from SPGC/KPMG’s study about the different legacy priorities between male and female CEOs may also have implications for practice. It reports that female CEOs tend to focus more on corporate social responsibility (CSR) and less on biological legacy. This highlights the value of diversity in family firm leadership. It also raises a question about how the gender of the leaders of family firms affects their long-term strategies, particularly in relation to CSR and sustainability, a possible focus for new research.
The differing priorities of male and female CEOs highlighted in the SPGC/KPMG research points to the need for research to examine how gender shapes legacy-building and business outcomes among family firms in the UK. For example, building on the already substantial body of research on family governance (for example, Astrachan and Botero, 2024; Howorth and Kemp, 2019), further research could explore how gender dynamics shape family-business governance, leadership styles, and approaches to social responsibility, offering insights that could promote more inclusive leadership models.
Fifth, succession planning and governance
The report highlights that many family businesses with strong material or biological legacies may be at risk of stagnating if they do not ensure their family governance practices engage the next generation. UK family firms must focus on formalising succession planning and governance structures to ensure smooth transitions and prevent potential conflicts between generations. The insights from the roundtable discussions in the SPGC/KPMG study suggest that creating structured development plans for future leaders is crucial for preserving business performance and family unity.
Sixth, family-business legacy in the UK context
The SPGC/KPMG study offers a global perspective, but it also highlights regional differences in how legacy components are valued. There is scope for further work to look at whether the findings hold true among family firms in the UK and whether there are distinct characteristics that shape legacy-building among UK businesses.
The SPGC/KPMG research highlights the importance of balancing tradition with innovation in family businesses. While legacy provides a solid foundation for long-term sustainability, family businesses need to take care not to let it hinder progress. The findings suggest that focusing on social and entrepreneurial legacies may lead to improved business performance and sustainability. Family businesses that can embrace their legacy as a dynamic asset rather than a static tradition may be better positioned to thrive across generations. Finally, SPGC/KPMG’s study suggests that business-owning families can benefit from nurturing an entrepreneurial mindset among the next generation and by prioritising sustainability.
The latest report from SPGC/KPMG, Unlocking Legacy – The Path to Superior Growth in Family Businesses, can be downloaded here.
References:
Astrachan, C. & Botero. I., (2024). Business Family Governance 2.0. London: Family Business Research Foundation. Available at: https://www.fbrf.org.uk/reports/business-family-governance-2?rq=governance
Calabrò, A., & Langsford, R. (2024). Unlocking Legacy – The Path to Superior Growth in Family Businesses. STEP Project Global Consortium (SPGC) and KPMG Private Enterprise. Available at: https://assets.kpmg.com/content/dam/kpmg/xx/pdf/2024/05/unlocking-legacy-the-path-to-superior-growth-in-family-business.pdf
Family Business United. Family Business - Legacy. Available at: https://www.familybusinessunited.com/familybusiness/legacy (Accessed 22 October 2024)
Howorth, C. & Kemp, M. (2019). Governance in Family Businesses - Evidence and Implications. London: Family Business Research Foundation. Available at: https://www.fbrf.org.uk/s/governance-in-family-businesses-evidence-and-implications_web.pdf
Howorth, C., Parkinson, C., Leitch, C. & Stead, V. (2016). Next Generation Engagement in UK Family Business. London: IFB Research Foundation. Available at: https://www.fbrf.org.uk/s/next-generation-engagement-in-uk-family-business.pdf