Children step away from family business in favour of professional independence

There was a time when family businesses ruled the roost and it went without saying that children would inherit their parents’ entrepreneurial endeavour and go on to pass it down the generations. However, a study carried out by HSG’s Center for Family Business and EY has shown that the tides could be about to change for this traditional market as students and children express a newfound desire for professional independence.

The times they are a-changing

Cast your mind back to a good few decades ago or at least to the stories your grandparents have told you about when they worked for their father’s village butcher shop or their mother’s successful bakery. This way of working was the norm and it went without explanation that if your relatives owned a business, you would build your own career within its four walls. But over the past few decades, this working model has experienced a gradual decline and family businesses have become somewhat of a novelty.

Research issued by HSG’s Center for Family Business and EY has demonstrated that a vast number of children are no longer wanting to take over family businesses and are instead looking to build their own careers. The study included a survey of 31,000 children of parents who own a family business, from 34 different countries and found that the desire for entrepreneurial succession was fairly varied across the board.

The facts and figures

Germany, Austria and Switzerland were among the top countries where children were most likely to have alternative career plans, figures showed. In Switzerland, less than 4% of the 100 students surveyed showed an interest in taking over their family business within five years of graduating. This means that a global decline in succession intentions of about 30% has now come into play. This specific percentage for Germany was 46%, 31% in Austria and 6% for Switzerland.

In general, this tendency towards professional independence continues as only one in ten of those interviewed said they could envisage themselves taking over their parents. Here in the UK, the quantity of those who said that they could see themselves “becoming a successor” was generally much higher with nearly 30% agreeing so. However there was still an extremely low proportion (3.9%) of those who saw themselves taking over their parents within five years of graduation.

Interestingly, the rate of intention was as much as 25% lower amongst females which suggests that the daughters of those who run a family business are far more wary of this way of working. Professor Thomas Zellweger, who co-authored the study, said:  “It becomes apparent that daughters consider an entrepreneurial career more risky than sons and sons are more convinced of their entrepreneurial abilities than daughters.”

What this all means

As with all of the countries involved, alternative and often better opportunities on the job market are being cited as the main cause of this downturn. The research revealed that nearly 60% of all children said that they would rather work towards becoming an employee than a business owner, while more than a third said they want to start up their own ventures.

This lets us breathe a sigh of relief as it suggests we have no need to worry about a potential lack of entrepreneurial spirit that could have been accounting for this widespread disinterest in family business succession. In fact, children seem to have even more get-up-and-go about them as they chase their own professional goals.

Zellweger said: “Many children of entrepreneurs want to become entrepreneurially active, but generally not in their parents’ businesses.” But this is not something that should anger or upset the parents of those who choose to take their own paths to success. The children should instead be supported and encouraged to realise their professional dreams. However should parents wish to guide their children towards the family business then they need to do it sooner rather than later according to Professor Philipp Sieger who lead the project.

He said: “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”. So the sooner children are provided with a taster of the day-to-day running of the family business, the more likely they are to want to get involved during their own professional careers.

If you are running a family business and currently working alongside your children, you might be interested in our article on how to strike the right balance between business and leisure which you can find here


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