The great wealth transfer is underway, and while much has been said about Gen X and Millennials, a new report finds that Gen Z is small (in proportion to their cohorts) but mighty. According to EY’s study, How can understanding the influence of Gen Z today empower your tomorrow?, while Gen Z makes up only 14% of the U.S. population, they outpunch their weight in influence.
Unlike any generation before them, Gen Z grew up amid uncertainty and polarizing events. They have lived through 9/11, the COVID-19 pandemic, recessions, corporate scandals and constant school shootings, to name a few. These events, as well as growing up in the era of smartphones, social media and on-demand information, have shaped their values, desires and beliefs.
Young But Influential
As more Boomers retire, Gen Z'ers are on pace to soon outnumber the Boomers in the workforce. The biggest differentiator for Gen Z is their expectations of both the companies they work for and the ones they buy from. They’re ready to use their voice and demand transparency, fairness and authenticity. Compared to older generations, Gen Z has its own take on corporate culture and work-life balance—they also prioritize enjoying their work over making money. Despite this preference, Gen Z is also the generation most worried about their financial security, with the report finding that 52% are worried about not having enough money. While concerned with their financial situation, the study finds that compared to millennials at a similar age, Gen Z is less likely to believe they'll become rich in the future.
Unlike their predecessors, who looked down on having a side job, Gen Z has perfected the “side hustle.” One only needs to look at the show Shark Tank to see a myriad of success stories of passion projects turned into multi-million dollar companies. The gig economy goes hand in hand with the hybrid work models that have emerged due to the pandemic. The study finds that “Gen Z is gravitating toward companies and opportunities that merit value based on their productivity and impact, not hours.”
Gen Z is also reshaping investing strategies. The youngest generation has a bigger appetite for risk and is starting to invest at a younger age. They’re also interested in a more diversified portfolio, expanding beyond traditional stocks and bonds to include alternative asset classes such as private equity, real estate and cryptocurrency. Gen Z also ranks sustainable investment as a high priority.
Can They Handle the Driver's Seat?
According to the study, these differences in attitude are creating new obstacles for intergenerational succession within family businesses. For starters, current leaders may need to convince younger family members that the family business fits their values, beliefs, and views on work-life balance. Gen Z may be less inclined to go into the family business as they perceive it as demanding and time-consuming. They’re also more interested in a career that aligns with their passions and desire to make a meaningful impact on society while staying authentic to who they are.
Rather than simply impose their decisions on the younger generation, family business leaders may want to create a more collaborative environment in lieu of a standard hierarchy of leadership. Open communication and striking a balance between successful past practices and the vision of next-generation leaders are also crucial. Current leaders may also embrace Gen Z’s desire to make an impact, such as with socially responsible investing, by allowing the youngest family members to have “a seat at the table.”
Preparing Gen Z
A simple desire to take over the family business isn't enough. “Stewardship is about looking out for the greater good, and there are several attributes such as understanding both the privilege and responsibility of ownership, knowledge about relevant topics to the business, a willingness to limit short-term personal gain for the long-term interest of others and a desire to contribute to family cohesiveness that can make a person successful at the job," said Bobby Stover, EY Americas Family Enterprise and Family Office Leader. Beyond professional skills, which usually can be taught, there are several types of assessments that families can consider to determine whether a certain family member has the traits needed to succeed. They can also help families identify where there might be gaps in a person’s natural abilities. "When those potential pitfalls are identified, they can work with qualified couches and consultants to help close those gaps. A willingness to instill core shared family values, provide relevant education opportunities and be transparent about expectations is key to preparing Gen Z family members for responsible stewardship,” Stover explained.