THE OFFICIAL MAGAZINE OF FAMILY BUSINESS UNITED
FAMILY TIES AT STALKERS The evolution of a business with family at the core
SERIOUS CLEANING KNOW-HOW Keeping it clean at Robert Scott
Providing wider horizons for family firms BAMBINO MIO
THE FAMILY BRAND
When a big idea goes global
Carina Contini shares her thoughts on life in a family business
Exploring some of the challenges when your name is part of the brand ISSUE 5 NEWS 1
Investing should be like water Simple, clear and refreshing
Planning for the future can feel a little bewildering. How do you know if youâ€™re saving enough? What about the political and economic uncertainty? And then thereâ€™s the jargon that makes no sense. There is an answer. If you want someone to talk common sense to you about your future finances, get in touch today for a no-nonsense financial review.
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The value of investments can go down as well as up and you may get back less than you originally invested. Seven Investment Management LLP is authorised and regulated by the Financial Conduct Authority. Member of the London Stock Exchange. Registered office: 55 Bishopsgate, London EC2N 3AS. Registered in England and Wales number OC378740. 22 ISSUE NEWS 5 NEWS SPRING 2017
Family Business is the official publication of Family Business United and FBU Scotland, the award-winning magazine and resource centre for family firms. Family Business United 49 Pendenza Cobham Surrey KT11 3BY 07718 001179 Twitter – @FamilyBizPaul email@example.com FBU Scotland Stirling House 226 St. Vincent Street Glasgow G2 5RQ 0141 243 4988 Twitter – @ScotlandFBU www.familybusinessunited.com
Paul Andrews Editor in Chief Welcome to the fifth issue of Family Business, the bespoke magazine for the UK’s family business sector. At a time of incredible political and economic uncertainty, life for family firms across the UK is by no means easy, but with an air of necessity, family businesses will continue as best they can and carry on, as many have done for generations, and hopefully will continue to do so for many more. Successful family firms embrace change, innovate and evolve over time to ensure that the business remains relevant, developing the right frameworks, governance measures and communication tools to meet their needs. In this issue we explore how a number of multi-generational family firms have stood the test of time and how successive generations have added their own mark to the business at both Francis Kirk and Robert Scott. Family firms now operate in a truly digital arena but many need to further embrace technology and innovation as they prepare for the future. We take a look at the back story of one family firm with a digital strategy at its core as it strives for growth, exploring how Bambino Mio is making the most of digital strategies in the continuing evolution of their global brand. Elsewhere, family firms have to deal with unique challenges associated with their very nature and composition – in this issue we explore the benefits that Non-Executive Directors can bring to a family business as well as the values that underpin family firms, branding and reputational risk and the need for owners to step back to aid succession. There is also the usual collection of news, insights and opinions that we hope that you will find of interest. As always, family firms are at the core of all that we do so please do send us your news, engage on social media and if you have not done so already, become a member of our innovative family business community and help us further our endeavours to champion family firms, and continue to give them the recognition and support they deserve.
ISSUE 5 EDITOR’S LETTER 1
“Theyareanexcellentteam,whoareverydowntoearth,highly commercialandhighlypragmatic.” Client
Farrer&Co’sFamilyBusinessgroupprovidesspecialistlegaladviceon thefullrangeofissuesfamilybusinessesmightface,spanningprivate client,corporate,family,financialservices,disputes,IPandresidentialand commercialproperty. Weareoneofonlyafewlawfirmsabletooffergenuinelymarket-leading expertiseinalloftheseareas–allunderoneroofandreadilyavailableto collaboratetoachievearapidsolution. Wecanadviseonsettingup,developingandgrowingyourbusinessas well as succession planning, asset protection and personal issues. We have very strong relationships with our family business clients, relationshipsthathavebeenbuiltupovertimethankstoourconsistently strongtrackrecordandin-depthmarketknowledge.
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CONTENTS Queenâ€™s Award for St. Austell Brewery
Family Business 40 Wider Horizons for your Family Business
Family Ties That Bind At Stalkers
Exploring the role of Non-Executive Directors in family firms.
44 Owners Need to Step Back A look at some of the challenges associated with family business longevity.
46 F inding The Right Level Of Conflict
How conflict can actually be a good thing for family businesses.
R ound up of all the latest news from the family business sector.
14 The 2018 Family Business of the Year Awards
Q & A With Carina Contini
24 Family Ties Them Together at Stalkers The evolution of a Cumbrian family firm with family at the core.
28 Innovative Generations Taking a look at the role of each generation in the development of Francis Kirk.
33 When A Big Idea Goes Global A look behind the scenes at Bambino Mio.
48 Extolling Family Values iIn Family Firms. Exploring how values are nurtured and developed by subsequent generations.
50 Protecting the Family Brand
Reputational risk and family firms.
52 Influence of Consensus in Family Firms
Exploring the power of consensus.
36 Serious Cleaning Know-How The journey of Alastair Scott into the Lancashire family business.
Opinion 16 Inside View Carina Contini, the critically acclaimed Scottish chef shares her thoughts on life in a family business.
18 Keeping Owners Awake at Night Latest research from Family Business United on what is on the family business agenda.
22 Building A Lasting Legacy Key findings from the PwC 2018 Family Business Survey.
Protecting The Family Brand
Cleaning KnowHow At Robert Scott
Perspectives 56 #FamilyBizChat Story-telling and history as a differentiator for family firms.
ISSUE 5 CONTENTS 3
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our new s storie paul@fa s to milybus inessun ited.co and we .uk ’ll share o n our a winning wardmagaz ine and social media platform s.
CELEBRATING 50 YEARS! William Turner and Son, the leading UK manufacturer and supplier of premium school ties, bags and accessories, is celebrating after reaching 50 years in business. Founded in 1969 by William Turner in his spare room, and joined soon after by son Keith, the Stockport based company has grown from its humble beginnings and now employs 125 staff and has a turnover of £11 million. The 3rd generation family business supplies some of the world’s most highly esteemed names in the schoolwear, club and corporate markets. After reaching this momentous milestone William Turner now has big aspirations for the future as the business sets to work on its ambitious growth plans.
Daniel Turner, Managing Director, is thrilled to be at the helm of the family business his grandfather set-up at such an exciting time: “My family has proudly supplied ties to schoolwear retailers across the UK for the last 50 years and I am delighted to be continuing that tradition. The business has grown, and the team has increased, but the core family values of honesty, service and dedication remain.” “Building on our proud heritage, our plans for the future include launching a new eco and sustainable range of products, while also continuing to support and play a crucial part in developing and securing the future of British manufacturing. I’m confident my grandfather would have been proud of what we’ve achieved.”
The Family Business Road Trip 2019
The Family Business Road Trip is a truly innovative event that takes place from April 23 until May 24. Site visits, interviews, factory tours and more besides as the team tour the UK in a trip that really does put the family business sector on the map. Follow the trip as it unfolds on social media using the hashtag #FamilyBizRoadTrip
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JCB TAKES ON FORMULA 1 JCB has announced an exciting partnership with a new British motor racing team as the company continues to expand its presence in global markets. The partnership with the SportPesa Racing Point F1 team (formerly Force India) will see prominent JCB branding on the two cars driven by Lance Stroll and Sergio Perez in the new Formula One season. In addition, JCB will play a major part in Racing Point’s development by providing machines to help in the construction of the team’s planned new factory later this year. JCB will also provide a range of power tools and workwear for the British team as well as equipment
including access platforms and generators to assist the team when it races in Europe. JCB Chairman Lord Bamford said: “The popularity of Formula 1 gives JCB an excellent platform to promote our products on the international stage to both new and existing customers. JCB is one of the world’s biggest construction equipment brands and this partnership will help us cement and build customer relationships. We see great synergy with the Racing Point team; we both have a passion for pushing the boundaries of new technology and an ambition to succeed.”
FAMILY FIRM TAKES PRESTIGIOUS QUEEN’S AWARD functions including brewing, logistics and pubs – all of them award winners in their own right – but the Queen’s Award recognises the efforts of everyone at all levels across the business and that makes the award unique and very special.”
The Queen’s Awards for Enterprise are the UK’s most prestigious business awards, recognising and celebrating business excellence across the UK. As winners, St Austell Brewery demonstrated outstanding results in terms of their sustainable development and will now hold the accreditation across the next five years. Delighted to be able to accept the award on behalf of the company, CEO James Staughton said, “St Austell Brewery is a company made up of many different
“Winning the Queen’s Award is an enormous honour for all of us as it is the highest accolade that any business in the UK can aspire to. The exacting criteria of the awards process, especially in the field of sustainable development, also acted as an excellent way for us to review our aims and behaviours to confirm that our actions and decisions were aligned and that we really are doing as much as we possibly can to make our operations as sustainable and environmentally friendly as possible.” The Brewery has an award-winning estate of pubs and hotels across the South West of England. ISSUE 5 NEWS 5
TRUSTED ADVICE, ACROSS THE GENERATIONS Western Pension Solutions is a specialist pension consultancy that provides strategic advice to family businesses on how to manage their pension arrangements.
westernpensionsolutions.com 6 ISSUE 5 NEWS
TRIUMPH FOR ARNOLD CLARK Arnold Clark won no fewer than five awards at this year’s AM Awards, including the prestigious headline award, Dealer Group of the Year. There were also wins for Best in Customer Service, Best Used Car Dealer, Best Website and the Community Hero Award – as well as a commendation in the AM People Investor category.
Eddie Hawthorne, Chief Executive and Group Managing Director said: “It’s always an honour to be nominated for these awards and we were absolutely thrilled to win on the night. Over the past year, we’ve continued to innovate in all areas of the business and these awards reflect the hard work that’s been put in by all of our 12,400 employees.”
Family Firm Donates to Victim Support Family owned M. Lambe Construction has donated over £12,000 to Victim Support, their charity partner for 2018. Staff undertook a variety of fundraising events, including entering the Simply Health Birmingham Half Marathon as well as a quiz night, a world cup sweepstake and breakfast sale. Victim Support is an independent charity that provides specialist practical help and emotional support to victims of all crimes, whether or not the incident has been reported to the police. Michael Lambe, M. Lambe Construction Director, said: “I am extremely
N AT I O N A L FA M I LY B U S I N E S S DAY S E P T 2 3 RD 2 0 1 9 # G B F a m i l y B i z D ay 2 0 1 9 WWW.FAMILYBUSINESSUNITED.COM
proud of the way our staff got behind last year’s charity partner. Sadly, our Quantity Surveyor, Tom Banting, lost his father Tony and Victim Support were on hand to help Tom and his family through a very tough time. It is credit to everyone that we have been able to raise £12,000 for a worthy cause.”
September 23 is a key date in the calendar as it sees a wealth of activity celebrating the success of family firms and the contribution they make to the UK economy. Find out more and register for your free marketing pack at www.familybusinessunited.com
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Alex Allingham will be joining the Weir Rallying UK team ahead of the Sol Rally, Barbados in 2019. Following their fantastic success in the 2018 event, Weir Rallying UK have appointed a new driver for the 2019 season. Alex joins the team with a wealth of experience and successes to date, including winning the Welsh National Forest Rally Championship outright in 2010, 2011 and 2014 and having competed at Rally GB. He’s taking the seat from Dave Jenkins who took the team to success during Sol Rally Barbados 2018.
New Driver For Weir Rallying
TEN YEAR CELEBRATIONS FOR BIG PEAT Douglas Laing & Co, the independent family Scotch Whisky firm behind the “Remarkable Regional Malts,” celebrates a decade of their Islay Malt with a commemorative bottling. Inspired by a vintage scrap book, the label features a collection of emblems, stamps and hand-drawn illustrations in honour of Big Peat’s Islay home. A platinum foiled story book held within a heavyweight envelope accompanies each bottle, telling the legend of Big Peat and his whisky adventures. Fred Laing, Chairman at Douglas Laing and Big Peat’s best pal, comments, “Back in 2009, I dreamt up a feisty Ileach fisherman who would later become Big Peat, a brand that would grow at an average of 29% year on year, and subsequently be joined by Scallywag, Timorous Beastie, Rock Oyster, The Epicurean and The Gauldrons to deliver what we so modestly designate our ‘Remarkable Regional Malts: The Ultimate Distillation of Scotland’s Malt Whisky Regions.’ I’m delighted to see Big Peat continue to grow and to see ‘him’ develop such a loyal band of followers around the world – this special bottling is a fitting tribute to him!”
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“It’s great to be part of Weir Rallying UK – we’ve been in discussions for quite some time and I’m now keen to get behind the wheel. I’m looking forward to taking the team to new heights in 2019.” Sitting alongside Alex will be Ross Weir, Managing Director of HJ WEIR, Weir Laundry Equipment and WeCoTec, with the Team Principle Rob Weir remaining at the helm.
Fracino has clinched a contract to supply traditional espresso machines to iconic restaurant brand, PizzaExpress, which operates 478 restaurants in the UK and Ireland. Aligned with the requirements of PizzaExpress, Fracino’s world-class manufacturing facility has further enhanced the machines with features including a fast steam system. A champion of British manufacturing, Fracino proudly displays the Made in Britain marque on every machine that leaves the factory. Peter Atmore, Fracino’s global head of sales, said: “We were delighted to be approached and commissioned by PizzaExpress, a high-profile and highly respected brand. We look forward to a long-lasting partnership.”
FRACINO WIN PRESTIGIOUS PIZZA EXPRESS CONTRACT Assia El Kamli, Senior Purchasing Manager from PizzaExpress, said: “Fracino has developed a strong reputation as a multi award-winning manufacturer whose quality machines are installed in the UK and overseas. We’re delighted with the positive feedback we have received from our restaurants to date.”
High street jewellery retailer F.Hinds has rescued most of the Chapelle specialist jewellery & watch outlet stores from administration. F.Hinds, a family owned retailer with 116 stores across England & Wales and a history stretching back to 1856, has reached an agreement with administrators to take on 12 Chapelle stores in top outlet centres, including those operated by McArthur Glen, Realm and Land Securities.
F. Hinds To The Rescue
Managing Director David Hinds said, “We are delighted to be able to take on many of the Chapelle outlet stores as well as their website. We are also very pleased to be saving over 80 jobs. We believe that Chapelle complements our existing F.Hinds business and that we will be able to share our experience and to offer increased operational efficiency. We welcome the Chapelle staff and customers to our family and believe that a similar company culture will help us to build a new and better business together.”
The National Family Business Show 2019
Taking place in York on May 9, this is a new event for the family business community incorporating an insight stage with views from a number of family business owners, exhibition and over 20 workshops on topics from the digital agenda to governance, leadership, exporting and more besides. Find out more and book tickets via www.familybusinessunited.com
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NO TRIPS UP THE GARDEN PATH
Just clarity Happy families are one thing. Happy family-run businesses are another. Especially if family and business roles overlap, opening the door to emotions that can interfere with sound decision-making. Having professional advisers on hand – independent experts who understand the individual dynamics of your family business – can keep everyone on track. From strategic decisions to everyday operations, we’ll keep distractions off the agenda and make sure everyone’s heading in the same direction.
Cambridge . Chelmsford . Ipswich . Norwich 10 ISSUE 5 NEWS
Expansion at Tim’s Dairy Tim’s Dairy, family yogurt makers based in Chalfont St Peter and Little Chalfont, have invested in their dairy to expand the site and facilitate increased production of their awardwinning yogurt range. They first moved into Chalfont St Peter from London in 1996, taking on the Mopes Farm site in Denham Lane where they have continued to grow the business. Over the years they have invested in new plant and technologies, modernising the site and, more recently, a well-supported project to expand. This has increased production capacity and enhanced the process from production to delivery. “The project to expand the dairy has been a challenge for us, but we have always had this vision for our family business and we are delighted with the end result. We are always happy to work with the local community and we are delighted that this also gives us the chance to offer more local
employment opportunities,” says Chris Timotheou, Managing Director. Founded in a basement workroom back in 1949, the Timotheou family and their team of 70 will be celebrating 70 years of yogurt production throughout 2019. Their multi award-winning Greek style yogurts are renowned for their authenticity, great taste and high quality. They are bio-live, made with natural ingredients and all made with fresh British milk and cream.
ZONAL VOTED BEST EPOS BRAND Zonal has won the BigHospitality.co.uk Readers’ Choice Award for their Aztec EPoS system, which is used in over 16,000 hospitality businesses throughout the UK, for the second time in a row. Zonal’s CEO, Stuart McLean, said: “It’s fantastic to receive this vote of public approval for the second year in a row. We operate in a highly competitive marketplace, but this award is testament to the Zonal team that strives each and every day to deliver the very best in terms of product and service.”
The Scottish Family Business Conference 2019
Taking place in Glasgow on October 8, this is our flagship Scottish event and with a great line up of speakers and workshops is always an inspirational event for the family business community. Find our more and book your tickets at www.familybusinessunited.com
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REBRANDING FOR THE FUTURE Ripon-based Potter Group, which sold its logistics operations to WH Bowker two years ago, has announced a £25 million investment in the business over the next five years. The business has also rebranded as Potter Space to better reflect its current business as an owner, developer and operator of commercial business parks across the UK. Established by Derrick Potter in 1965, the Potter Group started with a single ten ton Bedford truck, carrying bulk grain and fertiliser on local routes. Over the next 50 years it grew its fleet and purchased five strategic distribution hubs throughout the UK, leading to the award of ‘Haulier of the Year’ in 2015. At the end of 2016 the family owned business decided to sell the logistics operation and concentrate solely on its business parks in Ripon, Knowsley, Droitwich,
CENTRAL FOODS BOOSTS RANGE
Central Foods has boosted its range of flavoured wraps for foodservice with the launch of a new spinach flavoured wrap. The new spinach wrap joins 12 ISSUE 5 NEWS
Ely and Selby, comprising more than 250 acres and in excess of 1.6 million square feet of commercial space. Speaking about the rebrand, which includes a new logo, website and signage for the business parks, Executive Chairman, Derrick Potter, said, “I had a wonderful 50 years building the Potter Group into an award-winning logistics company. However, after much deliberation, we made the strategic decision to sell the logistics operation so that we could concentrate all our efforts on developing the business parks.” “The launch of Potter Space is an exciting new chapter in the company’s history and I am looking forward to working with the new generation in helping to deliver first class commercial business parks across the country.”
the popular pumpkin wrap and beetroot wrap, as the appetite for wraps, rolls and street food-style, grab-and-go items all continue to increase. “Our KaterBake pumpkin wraps and beetroot wraps have been a great success with foodservice professionals, for their taste, looks, appeal and versatility,” said Gordon Lauder, MD of Central Foods. “We have now extended the range of wraps offered to include the KaterBake spinach wrap – a vibrant 12 inch flavoured wrap which will provide a colourful addition to the menu. All three flavoured wraps are suitable for vegans and vegetarians and provide a source of fibre.”
Acquisitions for A.F. Blakemore & Son Ltd A.F. Blakemore & Son Ltd has announced the purchase of the Philpotts chain of prepared-food stores, following the administration of parent company Patisserie Valerie. The move sees the £1.1 billion family-owned food and drinks business acquire the 21 Phillpotts stores located across the UK. The acquisition is part of the strategy to expand the business in line with the first of its core consumer missions ‘food for now.’ Following the divestment of its cash and carry division in 2018, the addition of the Philpotts stores enables A.F. Blakemore to advance the development of this offer.
A.F. Blakemore Chairman Peter Blakemore said, “It was important to reach an agreement that enabled us to keep the 21 Phillpotts stores open and secure the future of the 210 jobs for employees currently across the UK. Bringing Philpotts under A.F. Blakemore ownership enhances our current retail offer and is aligned with our strategic retail and food service plan. Our experience and knowledge of the food service and convenience sectors brings significant opportunities to develop the brand, whilst taking elements of the Philpotts offer into our wider business.”
BEAVERBROOKS SPARKLES Beaverbrooks has been named the 10th Best Company to Work for in the UK and their Chairman and MD have also been recognised at The Sunday Times Best Companies Awards 2019. The familyowned jewellers, which is the only retailer to feature in the Top 10 List, also received a special achievement award for featuring in the Top 100 List (mid-sized companies) for 16 consecutive years. Beaverbrooks, which is celebrating its centenary this year, is the only company in Best Companies’ 19-year history to have consistently achieved 3 Star accreditation. This is Best
Companies’ highest standard of accreditation which reflect ‘extraordinary’ levels of workplace engagement. In a joint statement, Beaverbrooks’ Chairman Mark Adlestone OBE DL FGA (five times previous winner of the Best Leader Award) and MD Anna Blackburn, said: “To be named among the UK’s Top 10 places to work and to be recognised as Best Companies’ longest-serving 3 Star accredited company, are great accomplishments. We’re also honoured to be recognised as UK’s Best Leaders as we enter our centenary year and are immensely proud of what we’ve achieved as a business. Our people are what make us so special and The Beaverbrooks Family has achieved some remarkable things together. As we celebrate our past, we’re very excited for our future – here’s to the next 100 years and beyond.” ISSUE 5 NEWS 13
FA MI LY BU S I NESS
OF THE YE AR
2018 FEATURE 1
Celebrating the very best of British family firms, the culmination of the 2018 Family Business of the Year Awards saw the crowning of some great ambassadors for the family business sector in Britain. Entries came from all over the UK, were as diverse as ever, and from the businesses that entered it was clear to see that innovation, investment, passion and pride continues to drive these firms to new heights. As Paul Andrews, Founder of Family Business United who run these awards explains, “We are delighted to celebrate the family business sector through these awards that recognise family firms from all over the UK who are going the extra mile, investing for the long term and creating a real difference in the way that they operate. Family business is as the heart of what we do and these awards are a real highlight of the family business calendar. Yet again the entries were amazing and it was great to see so many wonderful businesses gaining the recognition that they deserve.” As well as taking the Scottish Family Business of the Year title, Zonal UK took the top prize and were crowned Supreme Champions in the prestigious ceremony that took place at The May Fair Hotel in London.
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As Paul adds, “Zonal is a fantastic family firm and is highly deserving of all the plaudits that winning this award brings. What began as a simple EPoS till solution to a problem of theft in a family run hotel almost 40 years ago has grown into a great business employing over 540 people, whilst managing to retain its family culture and heritage. The family is central to the way that the business operates and family values permeate the whole organisation.” “Respect and caring are values that shine through at every level, non-family have been promoted to senior management positions and there is a real culture of innovation and dynamism about the business too. Zonal is a great ambassador for the UK family business sector and a worthy winner of the Supreme Champion crown for 2018.” Zonal’s CEO, Stuart McLean, said of the award: “I am so proud to be the recipient of both awards and must attribute our success to the fantastic team of people who make the Zonal family. My father, Ralph McLean, who founded Zonal almost 40 years would be incredibly proud of our achievements. This is for him too!”
The 2018 Family Business of the Year Winners Supreme Champions 2018 Zonal UK
Wales Clifford Jones Timber
Small Family Business Millers Fish & Chips
East & East Anglia Century Office
Special Achievement Award – Innovation Francis Kirk & Son
Special Achievement Award – Entrepreneurship Grasmere Gingerbread Lifetime Achievement Award Frank Maxwell, Fracino Family Business Apprentice Adam Knowles, Bagnalls Special Award – The Ones To Watch Glawning Bath House National People’ Choice Dunns Food & Drink
Yorkshire Harrison Spinks Scotland Zonal UK Manufacturing Harrison Spinks
Food Distribution JW Filshill Retail Arighi Bianchi Food & Drink Westons Cider
South & South West Oxford Products
Health & Welfare The Principle Healthcare Group
North & Northern Ireland Pioneer Food Service
Hotel & Leisure Tewkesbury Park
London & South East O’Donovan Waste Management
Transport & Logistics Stalkers Transport Property & Construction Roland Hill ISSUEISSUE 5 AWARDS 5 NEWS1515
INSIDE VIEW Carina Contini is a critically acclaimed Scottish chef who opened her first restaurant in Edinburgh back in 1996, and is part of their independent family business that has been in operation since 1919. 2019 marks a number of milestones for the family and the business and here Carina shares her thoughts on life in the family firm.
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What does your family business do? We feed people delicious food in iconic settings. How did you get involved? My family have been in hospitality in Scotland for almost 100 years. I was trained as a surveyor ‘to get out of the business’ but after marrying my darling husband it seemed like the natural step for us both to work together and feed people. What did you want to be when you grew up? I wanted to be archaeologist. Probably inspired by a crush on Indiana Jones! What are your first memories of the family business? Laughter and a lot of love. Hot ice cream mix (it was incredible) and counting money. I am the youngest of eight children. Happy days. What values are important in your family/family business? Integrity, honesty, loyalty but always do your best. And most importantly never give up.
What is the best thing about being a family business? You share the great times with the people you love and have the best support for the challenges. And the worst? We’re excellent at arguments! What is the best thing about your working day? Hearing we’ve done a great job and delivered on making people feel happier when they leave than when they arrived. Plus Breakfast in Contini George Street. The team absolutely spoil me. What is your proudest family business achievement? Survival.
What do you see as the biggest challenge facing family businesses? Be relevant for each generation. Our product and service has changed over the years but are values are the same. Don’t be frightened to change. What words do you associate with family businesses? Loyalty, fun, consistency, happy, and my husband added “tension” Words of wisdom – what piece of advice would you pass on to someone thinking about joining the family business? Explore all options first.
Is there a next generation waiting in the wings? There is but with no strings and no expectations. We have three children but while they can cook and are great hosts who knows what their future will hold.
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BUSINESS Survey 2018
Keeping Owners Awake At Night Latest research from Family Business United shows that uncertainty dominates the matters keeping family business owners awake at night.
Company profitability and sustainability is the top concern for family business owners
Nearly four in ten business owners have significant concerns over staffing matters
Uncertainty prevails and is a concern for over a third of business owners today
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Running a business in the current economic climate is not easy. With a prevailing uncertainty around Brexit, interest rates and changing regulation, family businesses not only have to deal with these challenges but also, by their very nature, need to balance the needs of the family and the business. Unsurprisingly, when questioned about what keeps them awake at night, profitability and sustainability of the business is the number one concern. Our annual survey of family businesses, sponsored by
Mazars and conducted towards the end of 2018 found that just like any other business, there are pressures for family firms to remain profitable but also to ensure that they remain current and relevant as a business going forward. History and heritage provide a great narrative to the business and to share through marketing and positioning statements, but that alone cannot guarantee any firm a future. Add to the need for a sustainable business, with a buoyant jobs market there is also added pressure when it
comes to recruitment, retention and motivation of staff which was cited as a significant issue by 39% of respondents. This is a challenge across most sectors and at all levels of the employment ladder. If not always at the top of the agenda for family firms, even when it should be, but challenges around succession, engaging the next generation and the development of future leaders were key concerns for family business owners across the UK today.
Top ten worries keeping family business owners awake at night:
1. 2. 3. 4. 5. 6. 8. 7. 9. 10.
Profitability & sustainability of the business Recruiting, retaining & motivating staff The economic climate Regulation, red tape & legislation Balancing the needs of the family & the business Succession/Identifying & developing future leaders The next generation Global political uncertainty Preserving wealth & creating a legacy Brand reputation & risk
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LONG TERM VIEW • Family firms are in it for the long term – 63% believe family firms take a more strategic long-term view than other organisations • Family firms engage externally – 55% have non-family board directors • Family firms could be more innovative – Less than half consider family firms to be more innovative than other organisations
believe family firms take a more strategic longterm view than other organisations
have non-family board directors
As a third generation family firm we are in it for the long term and focusing on a strategy for the future is important to us. Innovation is key to any business and family firms are no exception, and in the broadest sense we embrace innovation in all that we do – manufacturing, distribution and marketing. Innovation helps us to create new opportunities as a business and paves the way for an exciting future for all of us here at Macsween.” James Macsween Managing Director, Macsween of Edinburgh
STRATEGIC MATTERS • Families need strategic focus – 42% believe strategy will cause boards the most concern going forward • Family is at the helm – 86% of family firms have a family CEO/MD • Keeping it in the family – 84% see family retaining ownership for at least five years
As Zonal continues on its journey, we are aware of the need for constant strategic review. Like any business, the board will require different skills as the business grows and it is important to be continually aware of the needs of the business and to consider all the options available to us. As a firm we are always looking for innovative ways to grow and diversify so need to ensure we have a strategy in place to monitor and shape what we are up to.” Stuart McLean, CEO, Zonal UK 20 ISSUE 5 OPINION
42% believe strategy will cause boards the most concern going forward
86% of family firms have a family CEO/MD
FAMILY OWNERSHIP • Family adds value to the brand. – 81% of family firms believe being a family firm enhances the brand • Family enhances the overall business – 75% believe firms are stronger with daily family involvement • Family breeds success – 56% believe being a family firm contributes to winning new work
of family firms believe being a family firm enhances the brand
believe firms are stronger with daily family involvement
In the UK context, family firms employ around 12 million people and generate an estimated £1.3 trillion turnover each year, over a third of the turnover of the private sector, and face many pressures on a daily basis. Navigating the business through uncertain times is challenging for most if not all family business owners especially in the event of the need for change to business practices, adapting to changing rules and regulations and focusing on the needs of the family and the business, taking into account their own unique set of family values too. Hopefully, clarity will not be too far on the horizon allowing family business owners to clearly focus on the business and addressing their concerns too. Family firms will continue to prosper and to deal with the challenges they face – it is in their DNA to keep going and face the challenges head on. Research such as this will help to raise awareness of the concerns of the sector and help to prioritise resources, articles and insights to help them in their quest. If you would like to receive a copy of the full 2018 Family Business Survey simply send your request to email@example.com
As a business Fracino recognises the importance of family ownership and is proud that we have been family owned for over five decades. The powerful success story of our business as the UKs only manufacturer of traditional cappuccino and espresso coffee machines is steeped in family values and we are incredibly proud of our roots, our ethos and our family heritage. We truly believe that being a family firm is something that enhances our brand and creates more trust with our customers and our valued UK and global distributor network.” Adrian Maxwell, Managing Director, Fracino ISSUE 5 OPINION 21
In our 2018 Family Business Survey our UK participants told us:
49% will have brought in non-family professionals to help run the business in the next 2 years.
53% will have made signiﬁcant steps in their digital capabilities in the next 2 years.
Building a lasting legacy
61% identiﬁed their top challenge for the business over the next 2 years as accessing the right skills and capabilities.
63% intend to be more innovative over the next 2 years.
PwC is proud to work with family businesses. Agile, innovative and forward looking, they play an important role in our economy and communities.
Speak to our family business team about how your business can remain resilient and protect your family’s legacy.
Explore all of the ﬁndings: pwc.co.uk/fambizsurvey
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long term goal is to create a legacy.
We are excited for the UK family businesses interviewed for our 9th PwC Family Business Survey, they have big plans. They wish to leave a legacy beyond financial success and put the future of their businesses first. Recognising that there is still work to be done in professionalising the business many are looking outside the family and the business for skills. They are also investing in their digital capabilities and looking at new ways to drive growth.
What they told us: •
UK family businesses are experiencing higher levels of growth than we saw in our 2016 survey and like their global counterparts remain ambitious. Over the next two years 18% expect their business to grow quickly and aggressively, 65% expect their business to grow steadily, 15% to consolidate and 2% to shrink.
Most continue to focus on performance improvement; relying on existing markets, products and services. Just under half are also bringing in external expertise. In the next two years 53% believe it likely that they will have made significant steps in terms of their digital capabilities, 49% will have brought in non family professionals to help run business, 33% will be exporting to new countries and 18% will have significantly changed their business model.
●• M any are concerned by external factors such as BREXIT and general economic conditions. However, in other areas like innovation and access to skills they feel more able to influence outcomes. Recruitment, retention and reward of talent is important going forwards for the vast majority, along with profitability and innovation. Other top personal and business goals over the next two years for 92% of participants are to attract and retain the best talent for the business, 74% to improve profitability, 64% to offer a compelling reward system for employees, 63% to be more innovative and 57% to contribute to the community and leave a positive legacy.
●• The majority have a clear sense of purpose and agreed company values. These are seen to impact in areas of staff retention/recruitment, business reputation, profitability and competitiveness. 0% believe their purpose and values improve their 9 company’s reputation in the market with customers, 88% that they make the company a happier place for their employees to work, 83% feel they improve staff retention, 82% that they make their company more attractive to potential joiners, 76% that they help increase revenue and profitability and 74% believe they create competitive advantage. ●• M ore than half currently have the next generation working in the business and a similar number intend to pass on management and/or ownership in due course. 59% have next generation working in the business, 18% have a robust, documented and communicated plan in place, 38% have a succession plan in place (but not documented/communicated) but 40% have no succession plan in place. ● Similar to the global average, just over half plan significant steps in digital capabilities in the next two years. • Digital challenges for our survey participants include cyber security (37%), digitalisation (29%) data management (21%) and growth in artificial intelligence/ robotics as a challenge (12%). Explore the findings, visit: https://www.pwc.co.uk/fambizsurvey
ISSUE 5 OPINION 23
Family ties them together at Stalkers
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The circumstances behind Edward (Eddie) Stalkerâ€™s entry into the haulage and logistics industry is certainly a unique one, as Paul Andrews found out when speaking to Stalkers Transport Services Managing Director, Karen Stalker.
“Strange as it sounds, the company as it exists today originally came about after Eddie was involved in an incident with a drunk driver in Jersey, using the compensation money from that to buy his first heavy goods vehicle, which was a T.K. tipper, in 1968. With this, he carried stones from the quarries throughout Cumbria for use in the construction of, what was then, the new M6 motorway” explains Karen.
Together with his wife Rene, the pair ran the business under the name of E.T & I. Stalker, trading in that first tipper for a 17ft Ford D2000 flat-bed and securing a significant contract with The Inveresk Paper Company, based at Denny in Stirlingshire, to haul paper. This contract helped kick-start a period of steady expansion for the business, which coincided with Eddie’s sons Hughie and Gerald joining the company, which soon rebranded as Stalkers Transport. The 1980s was a decade of important change for the business. “By 1985, the family came to realise that they had outgrown their existing infrastructure, and this led to its relocation to its present site at Townfoot Industrial Estate in Brampton, Cumbria,” Karen continues. “It was around this time that the company officially became a limited one, continuing to be familyowned and now run by my father Hughie. Under him, Stalkers grew even stronger, becoming a founder member of the Pall-Ex palletised freight network in 1996, servicing a sizeable area covering the whole of Cumbria, The Borders and up into Edinburgh.” By the end of 2001, the company had purchased an additional 14 acres of adjacent agricultural land, much of which has since been developed
to further expand and improve the site through the addition of extra warehousing, the increasing in size of its truck and trailer park, and so forth. Now a genuine third generation family business, Stalkers has made it of paramount importance that it maintains what it calls ‘good old-fashioned family values’, strongly emphasising the ideals of hard work and reliability. “We have always strived to do things a little bit differently from most other haulage companies,” Karen explains. “Any company can run up and down roads with full loads from point A to B, but Stalkers is unique in that we have come to be recognised as experts in groupage and multi-drop deliveries, offering a guaranteed next day delivery service between Scotland, the north west and south east of England. As well as groupage and multi-drop deliveries, we also specialise in national full load distribution, just-intime deliveries, ex-works collection and part load services, and just-in-time warehousing. “We enjoy working in partnership with like-minded, quality companies and these collaborations have also helped all of us reduce empty running, reduce turnaround times, and massively improve our carbon footprint, another issue close to Stalkers’ heart.”
“The Brampton depot acts as an onward distribution hub for companies not wishing to travel in to Scotland. The third party hauliers drop their goods into Stalkers, can get their trucks serviced and maintained whilst their drivers have a break and then they are loaded back to an area of their choosing.” Going that extra mile for its customers is something that Stalkers takes great pride in, yet this would not be possible without the work of its valued employees. “The dedication and loyalty of our staff of almost 70 men and women over the years has undoubtedly been key to our success,” Karen enthuses. “Many of them have been with us through the tough times and the good, and it is because of that continuity that we have been able to come through periods of difficulty and move the business forward. We have worked very hard to make our employees feel like they are part of one big family, and I think this is reflected in the fact that we have individuals with us today who first started when they were 16 years old.” “Our six traffic planners alone have some 114 years of service with us between them, which is truly amazing and, I believe, speaks volumes for Stalkers.” ISSUE 5 FEATURE 25
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In order to support the efforts of its employees, Karen and the rest of Stalkers management team have made it their priority to invest heavily in the company’s infrastructure and fleet of vehicles. “By putting back into the company, we have been able to give it a complete overhaul, modernising our site and maintaining a regular replacement programme for our trucks, which currently ranges between every three-to-five years,” she reveals. This programme has contributed to the quick adoption of technologies such as Euro 6 engines, which has helped achieve massive savings in fuel costs, and has allowed the company to provide their overnight drivers with a comfortable and accessible environment to operate from, which has no doubt aided in the retention of a workforce that is becoming ever-more few and far between. The newest additions to the company’s fleet, six new DAF trucks, also happen to represent an impressive milestone event for Stalkers, namely its 50th birthday which it celebrated last year. The arrival of the new trucks also marked the re-emergence of the company’s original red, white and blue livery. “These new vehicles are incredibly eye catching, you can see them coming down the road a mile off, and follow a successful rebranding of the business a few years back,” Karen adds.
“We understand the importance of brand recognition and our newest trucks and trailers will really help to advertise the Stalkers name to more people.” As Karen goes on to state, the celebration of 50 years of operations also allowed herself and the rest of the family to reflect on just how far the business has come. It was this that led to Stalkers doing something it historically had not been known for, and that was applying for inclusion in several local industry awards. The outcome of this amazed even Karen. “The feedback we received, and the interest we had in our story was nothing short of incredible, and culminated in us winning the Transport and Logistics Category of the Cumbria Family Business Awards 2018, before going on to win the same category in the National Final of the Family Business of the Year awards hosted by Family Business United in a glittering ceremony held in the prestigious London May Fair Hotel. As you can imagine, such an incredible accolade means everything to us. It’s a huge pat on the back and massive thank you to our amazing people that all contribute to making this company as great as it is. We are so proud of them all.”
which made us very well represented and reconfirmed how fortunate we are to live and work in such a beautiful part of the country.” When it comes to what the future holds, Karen is very optimistic about the company’s ability to grow steadily as it makes greater use of the assets that it has invested in. What she is concerned about, however, is about the need to raise the profile of the transport and logistics industry, particularly amongst students and young adults. “I myself have six children, and having spent time with some of them as they go about their adult education it soon becomes clear how little attention is given to logistics, and how few people have an understanding of what it is all about,” she states. “This is something that we, as an industry not just as a company, need to address and put right.” “Together we need to push for more effort to be made in developing awareness, training and apprenticeships, as this will be the best way of attracting the next generation of men and women into this incredibly rewarding and diverse industry.” www.stalkerstransport.co.uk
“Cumbria is often regarded as a distant back water but the county came away with no less than six awards across a variety of industries ISSUE 5 FEATURE 27
Innovative Francis Kirk originated back in 1868 so last year saw them celebrate a major milestone for any family business, 150 years as a family firm that is now in the hands of the fifth generation. Paul Andrews spoke to Managing Director, Tom Kirk, to find out more.
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This business has continued to develop and grow over time â€“ in terms of scale, turnover and profitability and has come a long way since the founding Francis Kirk launched the business as a tool shop 150 years ago with the simple aim of manufacturing a quality tool for workmen to use. The business was born in Denton in a small shed and although the business has moved, it has not gone far and Denton is very much at the heart of the business today. Each subsequent generation added their own developments helping the business move with the times, remain relevant at the time and to continue to grow. Thomas Kirk was the second generation to take the business on and he developed the companyâ€™s offering to include the stocking of tools and not just
their manufacture, increasing the efficiency of the business and the speed of fulfilment of customer orders. Following the conclusion of World War II James Kirk came back from the war having signed up with his brother who sadly never returned. James returned with the bad news for the then girlfriend of his brother and vowed to provide for her as though she were family. In fact, the relationship bloomed and they eventually wed and became the next generation to run the business, the grandparents of the current Managing Director. The business took advantage of grants that were made available after the war for companies involved with projects to help rebuild the nation and the journey continued. The innovative and
entrepreneurial spirit of the Kirk family came to the fore because already known for making tools, James committed them to giving fasteners a go too which continues to be a major component of the business to this very day. Innovation continued and the fourth generation, Francis Kirk, the current chairman, recognised that the world was changing with the introduction of the metric system and driven by his foresight, the business was the first in the UK to manufacture both Imperial and Metric socket screws. Recognising the world was continuing to change, fifth generation leader Tom Kirk has not shied away from making tough decisions either, decisions that came hard but were necessary to enable the company to achieve the next stage of growth. New products were introduced, strengthening the supply chain and service to customers; new products included clothing, PPE and abrasives enabling Francis Kirk to become the one-stop-shop for customers. Further change followed and in 2004, after 136 years of trading from the original Saxon Street Warehouse, Francis Kirk relocated to Denton Hall Farm Road where they are today.
The acquisition of Pontefract based Philidas’ manufacturing plant in order to maintain full control of a specialist metal locking nut product followed. These products are sold into safety critical areas and as a result has enabled Tom to develop new international markets for the business. Since beginning over 150 years ago Francis Kirk has grown into a business with operations in the UK and overseas with a great reputation for what they do, operating from a purpose-built warehouse complex in Denton. As Tom explains, “Customer service is everything to us and when it is your family name above the door it means so much more. Each generation of the family has added a new dimension to our business that has helped us to grow, maintaining our core values at the same time.” Tom is also realistic about the way the business has developed, adding that “I am the first generation that has had to face the fact that the original core business of tooling is nowhere near as important to us as a firm as it was to my predecessors and it is the fastening business that is now our core trade.” Growth has been steady too and this is important to the family who pride themselves on financing their growth
and development out of cashflow. Tom is also aware of the benefits of diversification and admits that the “move into PPE, abrasives and clothing has added new revenue streams and enhanced our service offering too.” As a family business leader Tom is unusual, young, in a very senior position and with an experienced head on his shoulders, one that to a degree belies his age. He is also incredibly respectful of his father and the part that he has played in the business, and the development of Tom as an individual too. As Tom explains, “Growing up we had a great life and a good education and in hindsight a really early induction into the business too. From the age of six or seven months I was placed in a box and brought into the office by my father and went home at the end of the day in a box too! Preschool years were great fun too as I came to the factory and scooted freely amongst the boxes, something my young son now does himself although health and safety comes first much more than it did then!” Over the years, little known to Tom at the time his knowledge of the business continued to grow. By the ages of seven and eight he was coming to work with his father for a few hours when he could and then as he got older he had ISSUE 5 FEATURE 29
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roles at weekends and in the holidays, much like other next generation family members gaining experience and earning money in the family firm. Knowledge was being acquired all the time, from products to the needs of customers and more besides. Education continued until an important day for Tom and the evolution of Francis Kirk. As Tom explains, “I was seventeen and sitting with Dad in the back of a car being driven to London to watch the FA Cup Final and was excited about the day ahead. Dad had a pile of files with him and it was strange as I was in the back when clearly I would rather have been driving. I now know that Dad had something on his mind.” As Tom continues, “I was a captive audience as we were driven down the M1. The question that followed was whether or not I wanted to come on board and work in the family firm. I said that I did and that was that! I asked what the files were and Dad said that they were an offer from someone to buy the business, something that he had been evaluating, but my decision changed that and we moved forward with our plans for the future.” “I spent three years at University which I now appreciate was to learn about the ways of the world – cooking, cleaning, washing – and this stood me in good stead when I returned to Denton. I had the respect of the staff for
getting on with things and starting in the goods in yard I spent around three to four months learning each and every aspect of the business.” “One day, following the conclusion of what I had felt had been a good day at a national conference, I was talking to Laurence, the Sales Director and a key man in the firm then, and to this day, and he told me in no uncertain terms that I needed to grow up.
At the age of 25 if I was serious about the business then I needed to step up and make it easier for my father to hand it over to me in due course, when the time is right for him.” Tom clearly took this firmly on the chin and has grown into his role and made some big decisions too. The business has won some global distribution rights, has acquired manufacturing operations in India and is securing significant orders from firms in the Middle East. As Tom is the first to admit, “Now it is all about repaying the faith that the family have placed in me and moving things forward. As a custodian of the business for future generations I have to explore all the opportunities
as they arise. We have 26 employees and their families that depend on me to make the right decisions and they are my responsibility and I have my own family too, a son Raphael and a daughter on the way.” Tom appreciates all that his father has done and continues to do for the business as he remains Chairman and is a great ambassador for the brand too. As Tom concludes, “He can take a step back and enjoy life now and when the time is right there will be a transition of ownership. He leaves me to run the business on a day-to-day basis and given I am still young, it is up to me to steer the ship, something that I am relishing each and every day too.” There is a next generation but they are very young so the future is to be determined but this is an innovative family business that has been going for over 150 years, each generation has added their own mark and helped the firm to evolve, adapt and grow and it is now the turn of Tom to continue to develop this family firm as they set out on the next phase in their journey. Here’s to the next 150 years!
ISSUE 5 NEWS 31
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32 ISSUE 5 NEWS
When A ‘Big Idea’ Goes Global Bambino Mio are the most widely used reusable cloth nappy brand in the UK with an award-winning range of products that are loved by parents all over the world. Paul Andrews spoke to Founder, Guy Schanschieff MBE to find out more. Bambino Mio is founded on the principles of quality, convenience, style, comfort and value for money. As a business they are committed to developing products that are better for babies and the environment. Their aim is to deliver a superior customer service and product experience enabling parents to focus on the joys of parenthood with the intention of making reusable nappies commercially acceptable worldwide. Run by husband and wife Guy and Jo Schanschieff, Bambino Mio is based in the heart of the English countryside in Northamptonshire. As Guy explains, “I knew from a young age that I really wanted to run my own business and Jo
had been working as a management trainee at Marks & Spencer when she was made redundant so we decided to take some time out to look for our ‘big idea.’” It all began in 1991. Guy and Jo were travelling through India where they met an American at the Taj Mahal. Over dinner they got talking about a reusable nappy laundry service offered in New York. That was it, the seed of an idea was sown. Later on during their travels the concept was brought up in conversation in Sydney and so on returning to the UK, Guy and Jo set up a reusable nappy laundry service from their home in Northampton, and although the laundry service showed slow growth, Guy and Jo were convinced reusable nappies were the way forward. As Guy continues, “It became apparent that reusable nappies were increasing in popularity, but the demand of a laundry service was limited as parents soon realised how easy they were to wash and how much money could be saved by doing so. We understood at this stage that the business was never going to be scalable but had built up a loyal customer base and learnt a lot along the way.”
ISSUE 5 FEATURE 33
As a result, in 1997 Guy and Jo started to sell reusable nappies and associated products directly to parents through mail order and the business began to grow. As Guy adds, “In 1999 we secured our first national account and then went to the 2002 trade show in Cologne to look for new market opportunities. This resulted in our first international distributors in Spain and Malta. Growth continued over the next few years and turnover rose to £2 million by around 2007 which was split between the UK and overseas markets.” Like many other businesses, in 2010 the recession took its toll. Pretty much overnight the orders from the US and France stopped and the business was facing an uncertain future. As Guy explains, “This was a difficult time for us as a family and the business too and in hindsight, the next few years were tough and involved some difficult decisions. We did manage to turn things around and provide the platform for future growth and this is probably my proudest moment in business to date.” “Nobody saw the dip coming and so there was not time to prepare, we just had to get on with things and so we took the opportunity and delivered growth with the supermarkets in the UK and began a digital marketing strategy too. The digital strategy enabled us to go international directly and changed our business model that had previously been distributor led. As a business we grew by approaching potential customers directly which worked incredibly well for us and led to lots of new and exciting opportunities such as supplying the three biggest pharmacies in Germany,” continues Guy, As a family owned business, Bambino Mio invests for the long term with significant investments over the years coming in the integration of new IT systems and new appointments to strengthen the management team.
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Currently having 42 employees and turnover of £7 million, the digital marketing strategy has clearly worked and proven to be a worthwhile investment and as a business, Bambino Mio have managed to successfully use digital platforms where others are struggling. Guy is aware of the way that the business is growing and accepts that there are challenges too. “We are on a fast train with exciting growth projections and are moving on constantly. Challenges are always present but we see them as great opportunities going forward such as the integration of new skills to help drive the growth, investing in new social media and ecommerce operations and for a small firm of only 42 and 15 different nationalities, we need to make sure we retain the culture and essence of who we are as a business,” he explains. Growth is on the agenda and as Guy and the team are aware, “It is all about managing the resources and the space that they need to grow. We wake up to a different challenge every day but that is the exciting part about being involved with a business like ours,” he adds. “There is a culture at Bambino Mio and everyone buys into what we are doing. Historically, like other businesses cashflow was an issue but the recession and the attitude of the banks forced us to drive all the borrowings from the business and with no borrowings now we realise how much we are saving each and every day and it certainly helps us to sleep better at night too!” Relationships are key to the business in all areas – management, employees, customers and suppliers and form the core of what the business stands for too. “We do our best to make all the relationships work and have great staff and customers who appreciate what we do and how we do it. As we continue to evolve as a business there will inevitably be change, but we’ll always remember the
journey we have been on and where the business has come from and continue to build on what we have got now. Who knows where we will be in ten years time but the future is certainly exciting,” adds Guy.
In terms of the family and the next generation it is still early days. “All
of them have done their bit already, working in the school and university holidays but they range in age from 13 to 22 so there is plenty of time for them all to decide what they want to do in the years to come. There is certainly no pressure from either Jo or I for them to follow us if that is not what they really want to do. We’ll support the decisions that they make,” continues Guy.
It has been a great journey to date and one that has resulted in Bambino Mio becoming a well established brand too. Now, 27 years later, since the day they discussed nappies at the Taj Mahal, a wedding, three children, an MBE, over 50 awards and products available in more than 70 countries worldwide; Bambino Mio is the largest and most accessible reusable nappy brand in the world. Bambino Mio may have grown in size but the core family values remain the same – to manufacture high quality, simple, reusable nappies and associated products and make them accessible and affordable to all. www.bambinomio.com
ISSUE 5 FEATURE 35
SERIOUS CLEANING KNOW HOW! Robert Scott is a fourth generation family business with a ‘spotless reputation since 1925.’ Paul Andrews spoke to fourth generation MD Alastair Scott about his journey into the Lancashire family business. 36 ISSUE 5 NEWS
Fourth generation family member at the helm, Alastair Scott, is particularly proud of their history dating back over 90 years to when the business was founded by James Scott in a cotton mill. “We are now one of the last working cotton mills in Lancashire and for me, there is a lot that our founder would be proud of – knowing that we are still a champion for the local economy, the community, industrial heritage and British manufacturing. However, we cannot and do not rest on our laurels and need to keep pace with innovation too,” explains Alastair.
We are now one of the last working cotton mills in Lancashire”
As a business, Robert Scott is one of the UK’s largest designers, manufacturers, importers and stockists of cleaning products for the professional janitorial sector and probably best known for making mops – they sell over half a million every week which is a staggering 26 million mops a year! With a huge product portfolio of over 4000 products (mops make up less than 30% of the business) the range is designed to keep pace with the very latest cleaning and hygiene innovations, regulations and rigour of the sector too. Their wide range includes everything from microfibre cloths and medical cleaning trolleys to rapid response cleaning systems and mops, much of which is manufactured at the mill in Lancashire where they employ more than 250 staff, many of whom have been working in the business for years and are the latest generations of families that have worked in this family firm.
Family firms that survive the generations like Robert Scott not only need to remain current but to move forward with the times and that is something that Alastair is well aware of, feeling a level of responsibility for the business and those that have a stake in it. “We need to be a business that is fit for the 21st century and can remain successful as there are lots of people involved who rely on the business too. I take the position seriously as custodian of a long-standing business in the community, a business that our team has worked to help build over the years, growing from £4.5 million turnover when I became sales director to over £50 million today. I am really proud to have been part of this journey and the board knows we have had the support of a great team to work on successfully growing the business too,” explains Alastair. Alastair was not always destined for the leadership role and took a path that many other family business
ISSUE 5 FEATURE 37
leaders will associate with. His father was forced into the family firm by his grandfather and had no choice about what he was going to do but as Alastair explains, “my father was totally the opposite with the four of us and I was brought up always knowing that there were opportunities in the wider world outside of the family firm.” Alastair seized the opportunity and went off to college to pursue an education in architecture, media and design but once he had completed his education found that there were few jobs available. A job came up as a sales rep in the family firm and Alastair took it, seeing it as a temporary employment solution initially. As he expands, “I had the advantage of knowing the business because I had been involved over the years, holiday jobs and the like, so I had the knowledge and accepted the role. I took the job as a ‘regular employee’ and with no moral pressure from above and the proviso that I could leave whenever I wanted should another job come up. What started out as a rather temporary role
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became other things and I am still here today, many years later!” Alastair is aware of the challenges associated with family businesses, in particular, the next generation, and although two of his children are now working in the family firm, a son helping to load the lorries and a daughter in telesales, he is very real about the future. “Who knows where they will end up,” he adds. “Both have taken on roles within the business like I did, possibly as a temporary measure, although that never turned out to be the case for me so we will just have to wait and see what the future has in store for the business, but if we have to introduce professional non-family leadership to guide the business in the future then so be it.”
“We cannot simply employ family because of their name and their heritage, we have to employ the right people in the right roles to get the job done”
“there is too much at stake and it is not fair on each and every employee if we take on the wrong people, and it would not be good for the business either,” he continues. Alastair is also one of the lucky ones – he loves his job and loves to go to work each and every day. “You spend so much time at work and that is great for me because I love it. I do feel that my role is to an extent, a custodian of the business for future generations, and there is a responsibility to the employees too. It is a great business and everyone pulls together to make it work,” he adds. A great example of them coming together was when the mill flooded a few years back which was a tricky
Alastair made a silent promise to himself when he took up the lead role, that he would retire when the business was generating £1 million turnover a week but as he is now quick to point out, “I am not going anywhere yet!”
time for everyone. The team came together with the directors and the staff pulling together to mop the floors, load the lorries and safeguard the business. A difficult time but the cohesiveness of the team, the loyalty of the staff and the shared values and desire to work through it really came to the fore. As Alastair adds, “It is at times like these that you appreciate that the broader stakeholders really care and want the business to succeed and it reinforces the differentiator that we have as a family business over non-family firms.”
Robert Scott is a market leader and continues to deal with day to day challenges, such as competition, rising costs, what the next generation are going to do and how the business is going to expand to the next level. They are currently involved in a rebranding exercise to help them achieve the right balance of heritage and innovation and to prepare themselves for the next 90 years and beyond. Proud of their roots, proud to be a British manufacturer and proud to be based in a mill in Lancashire, Robert Scott is a family firm with a lot to look forward too and is clearly serious about cleaning and over the years has clearly cultivated a much deserved, ‘spotless reputation.’ www.robert-scott.co.uk ISSUE 5 NEWS 39
s r o t c e r i D
Wider horizons for your family business
Non-executive directors (NEDs) can be especially valuable for family-owned companies, yet many family business people remain sceptical about the contribution they can make. Juliette Johnson explains how high-calibre NEDs add value to a family enterprise.
In the early stages of a family business the board of directors tends to act more like a ‘rubber stamp’, exercising few (if any) of the serious management functions vested in a board. But as the firm grows and matures it becomes important for it to adopt a more accountable system of corporate governance and to embrace the idea that NEDs can be a catalyst for family company success. Many families, however, led by independent-minded founders and owner-manager directors, struggle to understand how NEDs, with no prior knowledge of their business and its history, will be able to make a valuable contribution. So much more than a traditional NED
We all know that NEDs have strict legal and fiduciary responsibilities. They must focus on board matters in ways that are detached from concerns about day-today operations, aiming to bring outside experience, contacts, industry insight and independent judgement to bear on board deliberations. Their knowledge and objective criticism can help take a company to the next level.
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But the right kind of NED – one who understands family dynamics and has experience managing transitions – has the opportunity to play a much wider role and can contribute on many fronts if required: • Fostering open communication. NEDs can help to build bridges and consensus between generations of the family; between the board and family shareholders; and between family and non-family executives. • Professionalising the business. Developing stronger board discipline and promoting best practice. These can be in short supply in family companies, often because of the limited career experiences of key family members. • Guiding the shareholders on ‘big-ticket’ decisions on which family owners have the final say. Like a change in strategic direction, a big acquisition or a significant change in gearing. As the number of family shareholders not involved in the business grows, NED guidance and facilitation can be a real help making these decisions.
We all know that NEDs have strict legal and fiduciary responsibilities. They must focus on board matters in ways that are detached from concerns about day-to-day operations
• Smoothing succession. Having more than one generation on the board can create challenges, particular for the younger generation who quickly become frustrated. A respected NED is able to ensure everyone has a voice and helps to build a partnership between generations
Key qualifications and qualities
• Strengthening family governance. Ensuring transparent and fair process in the family’s interactions with their business, and giving wider family reassurance that the business is being operated in the best interests of the shareholders.
An ideal NED should have courageous independence and impartiality that’s robust enough to stand up to the complex vested interests encountered in family companies. But they must also understand and respect the values and culture of the family, helping them to drive through change and discipline but at a pace they’re comfortable with and ensuring all stakeholders are on board.
• Supporting family employment. Helping the family to establish clear, fair and explicit family employment policies covering recruitment, remuneration and performance appraisal (an area where unbiased feedback can be in short supply). • Guiding family development. Providing an unbiased sounding-board and guidance in support of next-generation development and long-term succession planning. • Encouraging family teamwork. Acting as candid friend and trusted adviser, NEDs can reduce emotional stresses and promote conflict-avoidance.
With these specialist roles demanded of NEDs on family business boards, it’s no surprise that they need to come equipped with particular knowledge and some exceptional personal qualities.
With good questioning and listening skills, they must be free from allegiance to any particular family branch or generation, and able to probe sensitive issues in ways that minimise the possibility of friction and confrontation. Emotional intelligence and diplomatic flair will likely be at the forefront of their talents, because an NED’s relationship with the board and family
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Leading advisors to family businesses across the UK
Family Business Legal Services We understand that each family business is unique. Whether you’re a multiple generation business or a start-up, we can help and support you to plan and succeed for generations. Our family business legal services include: • Next generation planning
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members must be based on mutual trust, respect and a good deal of ‘personal chemistry’. NEDs must be prepared to invest time in the role, not only to learn about the business but also to earn the trust of family shareholders and to build an understanding of the dynamics influencing their relationships. Search and selection Finding an NED with these skillsets can be a challenge, but that’s what makes the right candidate so valuable. Before considering candidates, families must form a clear idea of the blend of abilities, experience and personality traits
that will most benefit their company. They also need to articulate what the job will entail, and in particular to define those areas that fall outside the ‘traditional’ role we expect from an NED. Finding this special skillset – and the right cultural, values and personality ‘fit’ – can take time. Family business and personal networks can help in the search for good candidates, but avoid being influenced by prior relationships that may jeopardise NED independence and impartiality. There will of course be a contract between the company and its new NED, defining their duties, the duration of the appointment and
remuneration. Be prepared to pay NEDs the market rate, reflecting the size and requirements of the business and the family, as well as the demands on their time. If you find the right candidate it will be money will spent. Finally, and critically, there must be family buy-in to the appointment based on a pre-agreed and transparent selection process. Although this will be driven by the board, many families provide non-working family with the opportunity to meet candidates prior to appointment, and give them the opportunity to raise any concerns they may have.
Appointing family members as NEDs: Special considerations Some family businesses have a tradition of appointing family members as NEDs to the board, to oversee the family’s investment and provide opportunities for financial education and business experience. Some even have protocols laying down minimum levels of family representation, be it by branch, generation, size of shareholding or some other criteria. These appointments are unique and require special consideration. Understanding the role
Business acumen is not necessarily the key qualification for such appointments, but remember that family NEDs have the same fiduciary duties as any NED. It’s essential that the role is carefully defined and that the selected family member is capable of contributing at the right level.
Selection process Appointments must receive family and board ‘buy-in’, otherwise credibility and legitimacy problems will arise. The selection process must be clear and robust. Education and training Communications
With candidates taking on legal obligations, training for family NEDs must be rigorous. This is often overlooked, but should include an induction to the business, financial training, new director training and any other specific preparation for the role.
Family NEDs play a key role in improving communication, especially when they’re appointed to represent specific family branches or generations (although remember NEDs remain legally responsible to all the shareholders). It’s useful to articulate how communication will work so that expectations are well managed.
Conclusion The value of NEDs in family companies should not be underestimated. At modest cost, well-chosen NEDs can bring independent judgement, wider horizons and outside experience to bear on board decisions, often acting as a catalyst for shifts in strategy that may be beyond the scope and imagination of the internal directors. They come into their own, however, when helping family businesses address their special challenges. As they work to keep emotions out of the boardroom and to balance the interests of the business, the owners and the wider family, high-calibre NEDs contribute to family company competitive advantage, financial performance and long-term sustainability. www.juliettejohnson.com ISSUE 5 FEATURE 43
Owners Need to
Morten Bennedsen takes a look at family business longevity, some of the challenges and the need for owners to step back. Too much centralised control puts a family business at risk when the owner-manager dies. Professionalising a family firm is a necessary yet difficult progression. The owner-manager starts with a solo performance but the firm builds into a symphony orchestra in which the family continues to have a say in the running of the firm. Family-run businesses need to shift their deeply engrained organisational culture from a single-family member leader to a professional manager leading the firm. It can be a difficult process to get right because of the larger emotional issues at stake. For professional managers who have little or no experience with family firms, most will have never confronted this kind of transformation before since it is unique to family firms. In general, both owner-managers and professionals often underestimate the length of time and the scope the process can take.
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One study has shown that large publicly-traded family firms in Hong Kong, Singapore and Taiwan have lost half their market value in the five years following the retirement of a family owner-manager. Most of these firms had been too dependent on the family leaders. Hence, embarking on the professionalisation process is crucial for the survival and prosperity of the family firm. In guiding the firm through this process, owner-managers will create added value while reducing key personal risks, such as sudden health problems or accidental loss of life. Take the example of Lee Kun-hee, the second-generation leader of Samsung who realised in the 1990s that the firm needed to move beyond its closeddoor culture and begin hiring talent from outside the traditional pool, and at considerably higher market wages. A sea change in culture was necessary for the firm to move from
a mass producer of cheap goods to a maker of high-quality innovative products. To make his point loud and clear, Lee issued a command to his staff: â€œchange everything except your wife and children.â€? From that point on, Samsung has developed a professional cadre of talented leaders across all its approximately 60 business units, whilst the Lee family still manage and control the company. An example of a company that was dragged into professional management is the Evergreen Group, which in 2017 had 27,000 employees and 30 major affiliates worldwide, of which four were listed on the Taiwan Stock Exchange. When its legendary founder Chang Yung-fa died in January 2016, he went to his grave with the mistaken belief that his youngest son by his second wife would take over as Chairman. However, his three sons by his first
wife put a stop to that. The leadership role was handed over to management professionals by the collective action of the three sons who together owned a majority stake in the company. Next-gen input The good news is that next-generation family members are more likely to embrace professional management if they are included at the very beginning of the transformative process. Their opinions count. Professionalisation of the family firm is also a key way to attract new minority investors including foreign ones. Investors want to hear that family-owned firms can continue to create value even without founders and their families. This is particularly true if the business could be sold to investors or taken public.
• Hire and empower non-family managers to make decisions and take responsibility without interference from founders and family members. • Clarify the role, structure and composition of the board. Once on the road towards professionalisation, ownermanagers can better communicate the vision, strategies and goals of the firm while retaining the spirit of the founder. By holding fast to family values and traditions, owner-managers can take off the operational executive ‘hat’ to speak authentically as engaged visionaries. They can then improve their chances of overcoming the challenges facing their firms and improve the likelihood of attracting external investment or even the transfer of the business altogether. In this way, stakeholders will better understand the direction in which the founder is trying to steer the company.
Many owner-managers start the process of professionalisation to allow next-generation a formalisation of company If a radical shift in the corporate family members strategy. In larger family firms organisation is on the table – are more likely to with few formal procedures such as an IPO or company embrace professional or defined structures, ownersale – founders will be in a better management if they managers often end up position to communicate the are included at the addressing the day-to-day news and adapt the firm to the very beginning of issues and don’t have time new paradigm successfully. the transformative to consider the big picture. In process” From solo to orchestra so doing, they are forced to In conclusion, the postpone making decisions professionalisation of a family firm that affect the future of the can be compared to a concert by firm, including adopting new business strategies, a symphony orchestra. At first, the star violinist gives a starting new investment projects, making long-term thrilling rendition of versatility. The performance is then plans, restructuring capital assets, conquering new handed over to the orchestral musicians who entertain markets and relocating production to other regions. the audience throughout the duration of the concert. It’s The typical elements of a professionalisation process similar for a family business, where solo performances are the following: by the professional managers are contained with the • Establish a formalised dialogue between generations. larger symphony orchestra – family members are still • Restructure leadership with a two-pronged approach: pulling some of the strings. – For the owner-manager: Take less of an About the authors – Morten Bennedsen is the André operational role and more of a strategic role. and Rosalie Hoffmann Chaired Professor of Family – For family members: Find the right roles and jobs Enterprise at INSEAD and Academic Director of the for current members and next gens. Wendel International Centre for Family Enterprise. This article was first published on the INSEAD website and has been reproduced with their permission.
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Why Family Businesses
Need to Find the
Right Level of CONFLICT From the outside, the Alexander family seemed to have it all.
Henry, the grandfather and family patriarch, had managed to turn a small corner store into a national chain and market leader. Not only did the business provide the next two generations a lifestyle that would have seemed unfathomable when Henry opened his first shop, but the business helped keep the family extraordinarily close. Henry’s sons all lived in close proximity, as did their children, most of whom worked for the company after graduation and spent much of their free time together. Below the surface, however, another reality existed. The tragic death of one of Henry’s children years before had been devastating to the family. It brought them even closer, but it had also led to a desire to avoid conflict at any cost. Why argue when life is short and precious? But that meant that family members were so afraid of damaging the family relationships that they were extremely reluctant to confront each other–on personal or business issues. Disagreements were quickly papered over to
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maintain a veneer of harmony. This came at a cost that they did not realise until much later. For most people, conflict is uncomfortable. That can be especially true in families who’ve watched family conflict tear successful businesses to pieces: Consider the Ambani brothers in India, the founders of Adidas in Germany, the Redstone family in the US, and even the fictional families of the 1980s TV show Dallas or the current HBO show Succession. What’s less often recognised is that too little conflict in a family business can have an equally destructive impact. When I discuss this with my students at Columbia Business School, where I teach a class on conflict in family businesses, it quickly becomes apparent that the impact of both too much and too little conflict on both the family and their enterprise are almost identical. In both cases, the business can suffer from limited growth, poor decision-making, a loss of competitive advantage, and, in severe cases, the sale or split of the
company. Similarly, families tend to break up into factions and suffer poor relationships. The mechanisms are different, but the results are the same. Conflict is a ‘Goldilocks problem’. Both ends of the spectrum are ultimately unsustainable–so the best place is in the middle. While Goldilocks may trigger you to think about the fairy tale with the three bears, a better insight comes from our solar system. The earth is in what astronomers refer to as a Goldilocks Zone. Much closer to the sun and it would be too hot to sustain life, much further and it would be too cold. Though the reasons differ, both extremes make life uninhabitable. Think about conflict as having two faces: external and internal. The external face of too much conflict is what we typically think of: the shouting, the screaming, the outwardly expressed anger. The internal face of too little conflict is different, it is quiet seething, an iceberg of emotions where the surface is pleasant enough, but
the danger lies beneath. Between these two extremes lies a healthy middle, where difficult issues can be raised, addressed, and resolved without doing lasting damage to relationships or shared assets. The reality is that unless a family’s interests are perfectly aligned, a rare occurrence in my experience, some conflict is inevitable.Therefore, the priority is to manage it, not tolerate or eliminate it. Conflict that is not managed inevitably escalates. For families on the ‘too much’ side of the spectrum, the challenge is how to reduce the intensity of the external conflict so that constructive conversations can occur. For those families on the ‘too little’ side, they must learn how to disagree in order to release the pressure that builds up from internal conflict. At least in my experience, the ‘too little’ side of the spectrum is more common in families, even though it receives less attention from the media. Most families are conditioned not to fight with each other. Ask almost anyone what matters most to them and it is their family, including the ability to spend time together to celebrate holidays, weddings, and so on. This pressure to be the perfect family that never disagrees often ends up sowing the seeds of destruction down the road. What actually constitutes excessive conflict (vs. constructive disagreement, etc.) depends on personal interpretation and varies by the culture of the family. Some families can more easily tolerate external conflict than others, and the extent to which people will stoically put aside their interests to support the common cause also varies. But here’s a three-part quiz you can use to get the conversation started
about whether your family enterprise is in the Goldilocks Zone: 1. Is there general satisfaction with the direction of the family enterprise? You may not be happy about every aspect, but if someone asked you if you were ‘better together than apart’, you would answer with an unequivocal yes. 2. Are decisions about critical issues being made? You may not address every single point of disagreement, but everyone would agree that there is no ‘elephant in the room’. 3. Are family relationships good enough to work and celebrate together? You don’t have to be best friends to own significant assets together. Instead, you have to be good business partners, which means you are aligned on the big issues and can enjoy each other’s company, at least most of the time. Last year, a friend forwarded me a picture he took of a can of Sierra Nevada beer. On the top of it is the line, ‘FAMILY OWNED, OPERATED & ARGUED OVER’. I have seen many businesses brand themselves around their family ownership, but this was the first I have seen to include conflict in that description. Ken Grossman, Sierra Nevada’s founder, says, “It’s funny, but it’s the truth. We can get together and argue over what’s best for us as a company moving forward, but we all do it in good faith, knowing that everyone wants what’s best overall.” If you can say something similar about your family enterprise, there’s a good chance you have found the Goldilocks Zone of conflict.
If not, you may find yourself in the same position as the Alexanders. Throughout the years, tempers would begin to flare – not because there was too much disagreement, but because important decisions were avoided rather than dealing with potential disagreement. Eventually, the family decided to sell the company rather than tackle any disagreements that would threaten to disrupt family harmony, such as how to transition the business to the third generation. Unfortunately, the issues that were unaddressed did not go away because the business was sold – historical grievances remained, with new ones emerging from those who opposed the sale. And without the business to keep them together, the family started to drift apart. Five years later, many family members looked back on the sale as a mistake. Both the business and the close relationships were now gone. No one aims to have conflict within a business – and even worse, within a family. But some conflict is actually healthy. It provides a chance to clear the air of lingering resentments, potential issues, and even find a productive process for disagreeing and still making decisions. Good conflict doesn’t have to destroy a family – managed well, it can make the bonds even stronger. About the Author – Josh Baron is a partner at BanyanGlobal, an international firm that works closely with family businesses to help them achieve their goals. This article has been reproduced with their permission. www.banyan.global
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EXTOLLING VALUES IN FAMILY FIRMS At the heart of most family firms is a value set, often created by the founding generation and nurtured and developed by subsequent ones. Paul Andrews explores some of them further. We know that family firms are different from their non-family owned counterparts but wanted to understand more about the real values that they exhibit and that helps differentiate them in the business world in which they operate today.
As Christian Mancier from Gorvins pointed out, “Family businesses are driven by culture, values, long-termism and a mentality of being a custodian and not necessarily turnover, profit, five year plans or ownership.”
Family Business United, the award-winning magazine and resource centre for family firms is innovative in its approach to all things family business so used the recent in a regular #FamilyBizChat on twitter to explore the characteristics and values that make family firms different.
Maria Villax from PwC and herself the next generation of a leading family firm in Portugal agreed, adding that, “resilience, a sense of purpose and a constant drive to do things the right way” are important values within many family firms and “the cherry on the top – a sense of pride in the origins that act as a guide for the next generation too.”
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“The pride that guides future generations is a great thing, but must be consciously cultivated and nurtured as it won’t happen by itself,” added Steve Legler from Family Legacy Advisers. Using social media as a collaborative platform affords many the opportunity to showcase what they do with family firms the world over, but more importantly the #FamilyBizChat affords family firms an opportunity to share their thoughts too and when it came to values and the characteristics demonstrated we received a great response. As Grant Georgiades, the second generation leader of Plan Insurance explained, “It’s vital that family businesses show integrity and practice what they preach. Family values are the basis of what we’re promoting ourselves on and we have to live by them – not just use them as a sales pitch and leave them when they don’t suit our purpose.” Kevin Kelway of Dorcas Media agreed, adding that “Security, family atmosphere, preservation of the family name, vested interests and family relationships are all unique points” that help to define the very nature of what family firms really are. Stephen ‘Paddy’ Dyson from HMG Paints that began as a business back in 1930 with two employees and a single product, and has grown to become the largest independent paint manufacturer in the UK, and is now in the hands of the fourth and fifth generation, sums up the underlying essence of values and how important
they are to family businesses on a broader scale. “There is a long term passion and focus from family firms that spreads throughout the company to employees. Also, the long term focus in building a legacy is key in uncertain times.” Maria agrees, adding that “the biggest difference between family and non-family firms is the long term view. Family businesses aim to be around for the next 100 years and plan for it, while other businesses build their strategy around their quarterly performance.”
Grant added, “Family firms have a real passion for what they do which is often rooted in a family firm as more people working within them have a vested personal interest in its success that goes beyond just picking up a wage. In turn, this pride in what they do transmits throughout the company’s culture.” Joseph Barsby, third generation of funeral directors G. Seller agrees that family values are important on lots of levels. “As a family business the business is representative of you as a family. Our business is built around caring for people and families in their time of need and to have family values at the core of who we are is special, to us as a family, and the extended family of our staff who take
pride in all they do each and every day.” Family values abound in businesses the world over – Pride, Passion, Integrity, Stewardship, Honesty and a general desire to go the extra mile and take the time to do the right thing in the right way are just some of the qualities that were discussed. But it goes much further than simply words. As we all know actions speak louder than words and those families in business that go the extra mile and actually demonstrate their values in their actions are clearly better placed to maximise these values in what they do on a daily basis. At FBU we love family business and it is at the core of all we do, but we are going to leave it to the words of John Falder, Managing Director of HMG Paints to conclude. “Our values are the core of everything,” explains John. “They are the first pillar of what we do and why we do it. Our values of decent, worthwhile, secure, underpin what we are all about. None of them are more important because they work together.”
Family businesses are unique. Family values make them different. Family values deeply embedded into a business can create a family business that is truly special.
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FAMILY BRAND Risk is a key challenge for any organisation and one aspect that family firms do struggle with is brand and reputation, especially when the family name is above the door. Paul Andrews looks into the challenge for family businesses.
In the world of family business, there is often a focus on the long term. Many owners of multi-generational family firms will tell you that they see themselves very much as ‘custodians or stewards of the business for future generations.’ It is natural then that as a whole, they tend to be more risk averse than their non-family counterparts and like to ensure that key areas of concern are addressed and planned for. However, the world is changing and there are more and more challenges that businesses need to take account of – from reputation and brand management to ethical trading, responsible sourcing, and of course the increasingly high profile cyber, political and tax risks. Risk is a key challenge for any organisation but one aspect that family firms do struggle with in particular is brand and reputation, especially when the family name is above the door. Family businesses use their brand as a way to create trust and research suggests that family firms tend to be more respected and trusted because of the family involvement, an involvement that may have been around for many years, if not generations.
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In our new ‘technological world’ social media can create instant results but there are also significant risks around the wrong messages getting out and the brand and reputation being damaged. Some families in business do struggle with balancing the benefits of embracing social media, and the significant risks around the wrong messages getting out and the brand and reputation being damaged. Strategies are adopted to manage the risk and minimise the damage but this itself may risk underachievement, especially from campaigns involving social media and promotional activity where there is a reluctance to fully engage and put the brand out there. In most cases the family is the brand and the two are intrinsically linked, but when it comes to the risk element, the families that tackle the challenge collectively, agreeing a strategic approach and creating a shared voice, are best placed to succeed. Whilst it is apparent that social media is not readily appreciated or understood by some of the older generation, they are well versed in the ‘old style’ methods of communication like PR. Sharing things that have worked well in the past; the business
It is important to have formal procedures to manage the risk, somebody responsible to check social media interactions and is ready to respond appropriately
and family values, tone of voice, and the brand presence they want to be seen helps the social media practitioners to continue to promote and talk about the family firm in the same light. It is also important to have formal procedures to manage the risk, somebody responsible to check social media interactions who is ready to respond appropriately â€“ to deal with complaints, enquiries, opportunities and challenges. In fact, family firms that deal with these issues as they arise, and respond quickly, taking them offline as appropriate, are better placed than those without procedures and people in place to do so. Like anything, brand is something that can be managed, as can the risks, but there needs to be a strategy in place to do so. Families in business have a real advantage, the family and their involvement, something that needs to be protected and nurtured, but also can increase the impact of the marketing and promotional activities when used in the right way, enhancing the credibility of the organisation and providing a story to the business too.
Families may be less inclined to take risks than their non-family counterparts but the challenges around technology remain. Cyber security and risks associated with doing business today are very real, and like social media and reputation, a key area of concern for all businesses. These risks are real. Families in business need to accept that the risks are out there, to evaluate them and the impact that they can have on the business and develop a strategy to minimise their impact should anything happen. Managing risk is important and with evolving technologies and the speed of communication moving onto social media platforms, family firms should look at developing appropriate strategies to manage the risks as they are not going to go away. Failure to develop plans is going to potentially expose them to the risks, the very risks that as a family they donâ€™t want to take on.
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Influence of Consensus in Family Firms When the ownership system is believed to be frozen in time, owners often concede too much power to irrevocability and underestimate the power of consensus to reflect change. Here we explore the influence around consensus in family firms.
There are three social systems in any family enterprise: the family, the business, and the ownership. Each system evolves over time, both independently and interdependently. Changes in the family – from marriage and divorce to birth and death – inevitably influence the formal ownership of the family business; changes in family relationships can also have a deep impact on the business. Likewise, changes in business – through organic growth, acquisitions, profits, and bankruptcies – have an impact on the other systems. The termination of a family member from the business can have repercussions that reverberate throughout the family system for years. Curiously, changes in the ownership system and the family that is served by it – or trapped in the legal structures, contracts, and other documents that formally define it – affect the other systems too, but not as often as they should. This oversight is due largely to the fact that the ownership system is assumed to be unalterable and frozen in time or (as we often hear from lawyers describing documents in the trust and estate planning process) irrevocable.
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When this belief exists, the family and the owners concede too much power to irrevocability and they underestimate the power consensus has to modify formal structures to reflect today’s realities and relationships. The alleged power of irrevocability needs to be challenged, not least because it causes the three systems to fall out of sync, leading families, businesses, and owners to become stuck in how they think about the meaning of ownership and power over time. How has the power of irrevocability become overestimated? In our experience, three factors contribute to this aggrandizement. Most obviously, the legal documents say that they are irrevocable, and the very word quickly dissuades owners from attempting to make revisions. At other times, documents may be expressly revocable – for example, corporate articles or shareholder agreements – but they are expensive to maintain and taxing to negotiate; owners typically don’t want to rock the boat.
Finally, owners under estimate the power that consensus has to modify even the most ‘irrevocable’ ownership structures. As a result, owners often under-invest in building the kinds of family and business relationships that are necessary to make consensus possible in the future, and they end up unnecessarily forfeiting flexibility and control. The family as a vehicle for consensus is one of the most under appreciated assets of family enterprise. That’s a pity because consensus among family owners trumps irrevocability in almost every situation. Indeed, today the trend in the law is for even the most irrevocable of structures – contracts, trusts, corporate structures, partnerships – to subordinate formal irrevocability to the consensus of those affected. And that’s the rub. If a consensus doesn’t exist, and can’t be reached, then the family enterprise loses its flexibility, and irrevocability takes over. At best, the ownership agenda is not advanced; at worst, destructive conflict erupts. Consider one client family (all identifying characteristics have been changed). Five siblings own a large, expanding business that they purchased from their parents. When they acquired the business, the siblings were in their late 20s, childless, and completely dedicated to growing
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the business. Forty years later, the business has multiplied in value many times over and is on the brink of another growth spurt. Adding to the complexity, some siblings have children working in the business and there are differing perspectives on their capabilities and potential. Clearly, both the family and the business systems have changed dramatically. Let’s look at what happened, or, rather, what didn’t happen in their ownership system. The ownership did not evolve. All major legal documents, including a key Buy-Sell agreement, had gathered dust on a library shelf for 40 years. When the siblings finally dug out the Buy-Sell as part of their estate planning, they were stunned to discover a ‘last-man-standing’ provision. This meant that on the death of any owner, the remaining owners had to buy shares from the deceased at a pre-formulated price. To fund that purchase, the BuySell also required the business to maintain a life insurance policy on each brother.
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Moving from the Buy-Sell to their business records, the siblings got another shock: The insurance policies that they were carrying were grossly insufficient to fund such a purchase. In fact, the policies would not cover even 1/20th of the value of the shares, which had grown considerably. Another worry: the business’ balance sheet would not cover the cash shortfall. In effect, the death of one owner would lead to a forced sale, or even worse, to the demise of the family business. The siblings were stumped. Was the Buy/Sell Agreement truly irrevocable, or was there something they could do to avert eventual disaster? We advised them that changes could be made if the siblings could reach consensus among themselves. After several weeks of work, reaching that consensus proved to be more difficult than anyone at first anticipated. It was relatively easy to agree on the Buy-Sell forty years ago when their interests were aligned, but times and relationships had
changed. The siblings more recently found themselves disagreeing about the employment of their children in the business and about participation in future ownership. Their relationship was also strained by animosity that had developed when two brothers tried to force a third brother to retire because of their belief that he had ‘lost his edge’. To make matters worse, one sibling had developed a terminal illness that made the Buy-Sell agreement and the associated cash shortfall at the business immediately relevant. What emerged from this potential deadlock – as in many other family ownership systems – is that the solution to ‘frozen ownership’ lay not in the law, but in the owners’ relationships with one another, in their creativity, and in their desire and ability to negotiate. Simply put, true irrevocability depends on the ability of the owners to achieve consensus, a consensus that, in this case, proved elusive in
large part because the breadth of the issues on the table was enormous. The siblings had to address forty years of changed circumstances all at once, and under tremendous emotional stress. A consensus eventually emerged that proved the resilience of the family ownership group, but the test was difficult and could have ended much less successfully.
continually review their documents, then they strengthen their relationships, develop ‘muscle memory’, and build a track record to improve the chances of reaching future agreements.
circumstances because ownership documents are living things, influenced by human relationships.
If you ignore these relationships, however, then you imperil future consensus, which becomes much more difficult to achieve under 3 – Tackle the tough conversations. Explore topics that owners prefer not pressure, and often when it is most to discuss. Avoidance is a very strong needed. And when consensus fails, then ‘irrevocable’ does truly become signal that issues are growing; left unaddressed, these issues will only be irrevocable. How can the pain of situations such more difficult to tackle in the future. About the Authors – Steve Salley as this be avoided or minimised? In and Nick di Loretto are both partners general, we suggest four principles 4 – Involve advisors. for preventative maintenance: Engage critical advisors in the review. at BanyanGlobal, an international Each of them will explore changes in firm that works closely with family businesses to help them achieve 1 – Agree to a process. the three systems using a different their goals. This article has been Define a timeframe (every three lens and will help to assess what reproduced with their permission. years may be appropriate) to reassess adjustments are necessary to stay in www.banyan.global whether the family, business, and balance. ownership systems are still in sync. In this case, the siblings would have Contemporary law is predisposed seen that the insurance policies to allow apparently irrevocable were grossly inadequate and that documents to be amended to the business balance sheet was accommodate changed circumstances. insufficient to fund any buyout. Wills and trusts, contracts, and even legal structures are often surprisingly 2 – Maintain discipline. malleable when consensus exists for change. Irrevocability can Stick to the process, even if change be negotiated under the right has been minimal. If owners
ISSUE 5 FAMILY BUSINESS 55
#FamilyBizChat The latest in our family business series on twitter addressed the topic of story-telling and how it is becoming a great differentiator for many family firms. Here are some of the insight from the discussion that ensued.
Christine Gatward @Gatwards As the oldest family run jewellers in the UK, we believe our heritage sets us apart from our competition. We tell our story in blogs and in print with a book about our history in-store.
Christian Mancier @mancier I love that when you visit the cafe @Arighi_Bianchi every table has a booklet about the history of the business putting family business values front and centre. Marketing the story is a massive differentiator.
Christine Dawood @DawoodChristine And that’s exactly what builds trust with customers. People don’t only buy a product anymore, they buy a story.
Suzi Woolfson @SuziLDavid Stories are so important – Especially if shown in pictures on a wall in an office for a daily reminder.
Joseph Barsby @GSellerCo As a family firm we have history adorning our walls and weaved into the very fabric of who we are today. It is important to retain the story and weave the legacy into the future too. Those we love don’t go away, they walk beside us every day.
Katy Turner @FamilybizKaty This is what sets #FamilyBusinesses apart & creates a competitive advantage. The history, passion and values shine through in a way that is very difficult to replicate in a faceless organisation. #FamilyBizChat
Check out the Family Business section on www.familybusinessunited.com for more insights and tips to help with some of the unique issues facing family firms, including story-telling and branding, succession, governance and lots more besides. Keep up to date with all the latest from our innovative world of family business on twitter by following @FamilyBizPaul and @FamilyBizKaty and join in the next family business discussion #FamilyBizChat too. 5656 ISSUE PERSPECTIVES 5 NEWS ISSUE 5
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