I had the pleasure of spending a couple of days recently with seven family enterprises involved in businesses as diverse as, the provision of exclusive artisan beauty products, the purveying of great coffee, through to the offering of fun, family holidays. The owners came in pairs; fathers and sons or daughters, mothers and sons, brother and sisters or leaders from families that shared a business. All had passion for what they do. After two days I concluded that passion and tenacity was a base requirement to achieve success and security for their families. Family business is not a hobby or an activity for the faint hearted.
I am embarrassed to admit, that up until a couple of years ago, I had little idea how important Family businesses are to the UK economy. It is increasingly apparent to me that one of the key things that government can do, is to somehow enable small family businesses to access support and peer networks. Give them space to share ideas, learn from each other and improve their return on their investment. We should never lose sight, that most family businesses are investing with their own money, they take all the risk and most have some scars from their journey. It’s personal.
Family businesses are important. They represent 88% of all UK businesses they are important. They employ 12.2m people, generate a quarter of UK GDP and account for 21% of the tax revenue (IFB)
Family businesses are keen to engage, but resources are tight. They want access support mechanism, but it has to be accessible, affordable and relevant to them. The leaders I met are enthusiastic, challenging, but also reflective when presented with alternatives. It was the first time some had returned to learning since their school days and they needed to find their confidence and voice.
The elephant in the room is succession. Circa 60% of family businesses want the next CEO to be a family member – yet most struggle with the issue of how to approach succession and so avoid it. Quite often there is real angst about how much succession represents a burden or an opportunity for the next generation, from both sides. This can’t be healthy for the UK – we need to consider how family businesses can be supported more in ownership transition. Its perhaps not surprising then, that UK family business trail other countries in their long term growth aspirations and their approach to managing risk.
Ownership and contribution to the business are complex issues. There are family members with shares in the business working in the business, there are family members with shares, not working in the business, then there are family members in the business with no share, or family members who have nothing to do with the business! Then overlay non family members. Diverse interests of stakeholders make for interesting decisions on strategic direction and day-to-day decision rights.
Good Management Practice is key to unlocking improvement and productivity. The ONS attributes circa 55% of the productivity gap to ‘management practices’. In my benchmarking sessions with over SMEs (120+) in the last two years, few are even aware of, let alone embracing, basic continuous improvement or LEAN methodologies – and most cost nothing. I can’t help thinking perhaps its time to do some root cause analysis on this question. Perhaps we should start here by drilling down the 5 whys?