ISSUES
: Business and Trade
Chapter 1: Business today
19
easily measured. In recruitment
costs alone, family businesses
often have an advantage over their
managed business counterparts
because they tend to keep their
staff longer, not least because
junior members are likely to take
more senior positions in the future.
Many of them become trusted
confidants and this plays to the
heart of the loyalty factor.
Long termism
Family business have a luxury that
many firms dream of – the ability
to plan for the long term. Knowing
that shareholder pressures for a
quick return are simply not there,
family businesses can better align
the deployment of resources with
their strategic objectives. This
long-term approach to investing is
often referred to as ‘patient capital’
and it can have huge pay-offs as
many of the businesses in the top
500 Index can testify. Around 44
per cent of businesses in the index
are run by fourth generation family
members and the average age of
the top companies is 88 years. The
most successful family businesses
move beyond the ‘dangerous’
third generation trueism that they
often fail, and build sustainable
management and governance
processes which are way beyond
the often held view that nepotism
prevails and damages the business.
Knowledge and
expertise
True expertise is endemic in a family
business because knowledge gets
handed down and from generation
to generation, not just in training
session or product manuals. The
greatest violin maker of all time
– better, many would argue than
Stradivari whom he trained, was
Nicolas Amati, who learnt his craft
from his father, who’d been tutored
by his father. The same is true of
today’s family firms, where in-depth
product and sector knowledge
is part of growing up in a family
business. The most successful
family businesses complement
this knowledge and expertise with
sound and solid business and
financial management and training
to ensure that they can last the
test of time and the very many
changes in cyclical businesses and
economies.
Challenges
Running a family business is,
however, not without its challenges.
With every positive that comes
from the emotional bond of the
family there is a negative.
Accelerus is often called in to
family concerns where the sudden
death of founder and no obvious
successor has left the business
floundering. The informal and
instinctive processes used to run
the business simply disappear as
they are rarely documented.
There is often a dangerous
assumption that a younger
relative will take up the reigns,
so succession planning is not
deemed necessary. The baton
is simply passed on at death or
retirement. But the massive swing
from manufacturing society to a
knowledge-based economy does
present challenges for family
business as many of the natural
candidates for leadership simply
don’t want to follow in the parents’
footsteps, or are often not the most
able to do so.
In the case where there is no clear
succession, we have to bring in
a leader from outside who has to
quickly become part of the family
and learn the unwritten rules of
the business whilst building the
sustainable systems, processes
and skills which are critical to future
success and sustainability. Anyone
of you who has had experience
of a new step-parent in the family
will appreciate the challenges this
brings!
When you get it right – like Walmart
who combine family members with
the best outside talent – the results
can be spectacular. The retailer has
15 board members but only two
are now Waltons – a fact that has
not stopped the family amassing a
fortune estimated to be a cool $147
billion.
26 October 2015
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