Blog Type, IPT Blog | May 2017
Family Business: Making a Success of Succession
On Monday 24 April 2017 the Industry and Parliament Trust (IPT) hosted a dinner discussion which focused on the topic of ‘Family Business: Making a Success of Succession’. The event was chaired by John Stevenson MP, Chair of the Family Business All-Party Parliamentary Group, and was joined by guest speaker Sian Steele, Partner and UK Family Business Leader at PwC. The dinner was attended by members of both the House of Commons and the House of Lords alongside industry experts and academics. The discussion was held in light of the recently launched 2017 UK Family Business Survey.
Family businesses remain a vital part of economies across the world, generating over a quarter of UK GDP and constituting almost half of UK private sector employment. They also play a key part of local economies, offering stability, a commitment for the long term, and responsibility to their communities and employees. However, the recent PwC Family Business Survey identified that only 12% of family businesses reach the third generation. With large proportions of family firms facing challenges and setbacks that often derive from a lack of strategic planning, the focus of this discussion was how to make a success of succession in a rapidly changing world.
Differentiating between Family and Non-Family Businesses
When looking at the success of a family business, attendees noted that we must be clear to define how a family business’ strategies and goals differ from non-family businesses. It was suggested that the most notable strategy differences for family businesses are the successful transition of the business from one generation to the next and effectively developing family members to take on new leadership roles. A number of additional key themes were conferred throughout the dinner discussion, including areas that have been concerning the family business sector for centuries and other more recent issues that have risen as a result of global megatrends. The main focus points included; governance, succession planning, digital innovation, family communication challenges, skills and professionalism, education and guidance, and the challenges of transitioning to the next generation.
While family businesses pride themselves on their ability to change, attendees discussed how this can often be harder in practice. In today’s Digital Age, only 17% of family businesses prioritise innovation with one quarter of family businesses in the UK admitting to feeling vulnerable to digital disruption. Attendees therefore felt that sustaining a culture of innovation, remaining focused on cyber protection and digital education, all remain key for family firms to embrace and succeed in today’s digital age.
Governance and Succession Planning
Governance and succession planning featured as the two most prominent themes of both the discussion and the 2017 Family Business Survey. Attendees agreed that management complexities are often more common amongst family businesses and that clear communication on goals and governance are fundamental. The challenge surrounding the rotation of skills, particularly at board level, was another popular issue raised from attendees at the discussion. Furthermore, with only 13% of family businesses in the UK having a robust, documented and communicated succession plan in place, the importance of a clear succession plan also plays a prominent part of maintaining business from generation to generation for future and continuing family businesses.
Family Business Support
Lastly, while business support and guidance have continued to be a priority for policy makers through various mediums such as start-up grants and support programmes, the discussion explored the specific guidance, support and advice required for family businesses. Areas such as tax, equity and debt are all vital to family businesses and calls for improved targeted support services from policy makers were made at the discussion.
Looking to the future, as family businesses continue to face unique challenges along with their unique strengths, early succession planning, clear communication on goals and governance within the family directed support services for family businesses can all contribute to UK family businesses making a success of succession in the long term.
Speaking about the event, Prof. Alfredo De Massis, Professor of Entrepreneurship & Family Business, Free University of Bozen-Bolzano and Lancaster University, said:
“The dinner discussion hosted by the Industry and Parliament Trust testifies the attention that the IPT is paying to such an important sector of the nation’s economy, i.e. family businesses. I found the discussion very timely and extremely useful and I was really impressed by the enthusiastic approach through which MPs, Lords, family business owners and professionals brainstormed about key areas of concern to help family firms succeed across generations.
All around the world the family business is the most common form of business organisation. And yet in Europe there has in recent years been a trend to support mainly start-ups and new ventures. Sustaining start-ups is absolutely important, but we know that start-ups are only a minority of the firms in any given economy and a low percentage of start-ups will survive even five years. What we should not overlook is that we can contribute much more to the development of a country’s economy by helping family businesses to grow, innovate and be sustainable across generations. This dinner discussion was a concrete starting point to openly and constructively discuss how to address the complex and unique management challenges of family businesses so as to preserve their value for the future generations. I came back from this meeting inspired and enriched with multiple thoughts for my research, education and outreach agenda.”
Words by Georgina Nicolettos