Business in the blood

The Century Club shows family firms how to thrive through the generations
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The Independent Online
IN THIS age of rampant globalisation it would be easy to run away with the notion that the family business is some quaint relic of the past. In fact, though, the family business is alive and well - and attracting a good deal of interest.

Earlier this month, the Stoy Centre for Family Business, which has been acting as a forum for this important sector of the economy for much of the decade, launched the Century Club. As its name suggests, this organisation is open to businesses that are at least 100 years old and is designed to encourage them to share experiences with the aim of becoming more successful.

But, as Peter Leach, chairman of the centre run by BDO Stoy Hayward, the accountancy firm that specialises in advising entrepreneurs, points out, it is also intended to pass on secrets of success to younger businesses. This is especially important given that research carried out by the centre shows that, although more than 76 per cent of UK businesses are family-owned or family-controlled, only 24 per cent of them make it to the second generation and just 14 per cent to the third.

The idea for the club - launched at Claridge's Hotel in London - came from Tony Duerr, great grandson of the founder of the jam maker F Duerr & Sons, which was established in Manchester in 1881. With his encouragement, Stoy Hayward gathered together over 40 other long-established firms with a combined history of more than 4,000 years - including Rotary Watches; the Kent brewer, Shepherd Neame, and Moss Bros, the retailer that is synonymous with formal clothing hire.

Monty Moss, president of the company that over 140 years has grown from a single shop to a 191-strong chain, told the first meeting of the club that he was doing all he could to maintain the personal family flavour in spite of the company recently going through a period of rapid expansion. In particular, this involves "impressing on our managers and staff the importance of my great grandfather's tenet of 'giving good value and selling good stuff' - and of offering first-class service to our customers."

Mr Leach's colleague, Tony Bogod, head of the centre's South-east region, says it is hoped that younger family businesses can be helped to avoid those "tricky problems so frequently caused by transitions between generations", by finding out about what makes more mature organisations tick.

Succession issues are also much on the mind of advisers at Grant Thornton, another accountancy firm that has been paying particular attention to the fortunes of family businesses.

It recently hosted a seminar devoted to this sector with the Institute of Directors (IoD), many of whose members come from such firms, and has also published "The Family Business Report". Produced by Sue Birley, professor of entrepreneurship at Imperial College Management School, from data collated as part of the annual Grant Thornton/Business Strategies survey of European business, it indicates a significant commitment to the concept of the family firm. While nearly half of family business owners throughout Europe are planning to hand over the reins and stand down from the day-to-day running of the business, the majority intend to ensure the business remains in family hands.

Professor Birley says her study's most important conclusion is that family business is "much more an attitude of mind than a function of majority shareholding" - a view shared by IoD seminar participants who wondered if J Sainsbury or Marks & Spencer still qualified as family businesses as, while founding family members were no longer involved in running them, they still exhibited a certain ethos. Mr Bogod adds that there is "no black-and-white definition - it's to do with the mindset of the owners."

There is also consensus on the ramifications. As Professor Birley points out: "This attitude clearly affects the strategies that owners adopt, both in terms of growth and product markets, as well as ... to economic opportunities, climate and succession planning."

Not surprisingly, family enterprises are generally smaller in terms of turnover, number of employees and management teams than non-family firms. And they are more likely to find themselves constrained by costs of finance and legislation. While inclined to be more pessimistic than other companies, they are still committed to remaining under family control.

But, within the overall heading of family businesses, different categories are emerging. "There are two sorts," Stoy's Mr Bogod says. "The professionalised ones and the ones where it goes wrong." And he stresses that, such is the peculiarity of family businesses, when it goes wrong in such a situation "it goes wrong in style".

All who've studied this area of business, still said to employ half of the UK population, agree the reason for this is the list of complex emotions associated with families, that seem to multiply when placed in a business context.

Accordingly, Andrew Main Wilson, managing director of the IoD, says that family business founders and leaders need to take tough decisions, which can require seeking to separate family interests from business interests.

"If for one reason or another [family] succession does not prove to be a realistic option, then there are other alternatives available such as selling the business, a merger, public flotation or even a management buyout by non-family executives."

Andrew Godfrey, head of growth and development at Grant Thornton, says: "It is crucial to get succession plans in place as soon as possible."