Rise and flaws of a family business
Wednesday 12 May 1999
The problems surfaced in the early 1990s, when the company, founded in the 1820s by the brothers Cyrus and James Clark, found itself under mounting pressure from a sharp increase in cheap imported shoes. Profits tumbled from pounds 41.7m in 1990 to just pounds 1.7m in 1993. Not surprisingly, the management came under attack from shareholders, largely made up of 1,000 family members. Even now the future of the company is still uncertain.
Peter Leach - arguably Britain's greatest expert on family-run businesses, an important sector of the economy - sees Clark as an example of the structural problems endemic in such concerns.
He uses the Clark story as a case study in Guide to the Family Business, a book he has written with Tony Bogod, a fellow partner in BDO Stoy Hayward, a firm of accountants specialising in advising growing businesses. They say the problems stem from having so many descendants of the founders dependent upon the company's fortunes. "When things are going well, such a `rentier class' is generally happy to sit back and watch the dividend cheques," write Mr Leach and Mr Bogod. "But if the income stream dries up, it can provoke a revolt."
The book also describes an overseas family business where the owner- manager had died. His widow was entitled to a third of the estate and his two children to two-thirds.
Bitter trouble started when the children decided their mother should sell her big, expensive house to provide them with two-thirds of the proceeds to finance the business.
But, though the peculiar circumstances of family businesses can make them prone to the sort of difficulties that inspire television programmes as varied as The Brothers and Only Fools and Horses, the authors stress that family businesses are not all bad news.
Large corporations are trying to adopt many qualities which are second nature to family businesses, including passion, commitment, flexibility in work, time and money, long-range planning, speedy decision-making, stability, reliability and pride.
Peter Davis, an authority on family-owned businesses, believes the long-term view is one of the most important aspects. "The privately held family business is the only entity that can truly build for the long run," he told a London seminar.
Independence is clearly as much a state of mind as it is a description of ownership. Sir John Harvey-Jones in his Troubleshooter TV series predicted a gloomy future for Morgan Cars.
But Morgan Cars continues to carve a niche in the volatile automobile industry. And Sir John writes in the book's foreword that he now realises "the unique nature of the skills required in running a family business".
Such organisations, he adds, "contribute a disproportionate share to our social stability and economic success".
t `Guide to the Family Business', by Peter Leach and Tony Bogod, is published by Kogan Page at pounds 14.99
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