The family business sector continues to play a vital role in the economic and social makeup of our nation. Family firms represent 76% of all businesses large and small and are the single largest source of employment in the nation. It is, therefore, more important to the UK than ever for a healthy and growing family business sector, rooted in strong values and with long-term vision, to survive.
Family firms add a much needed diversity to the economy. During the recession, strengthened by their financial prudence and stronger balance sheets, they were better able to weather the storm, with evidence showing lower numbers of business closures. However, operating within the current sluggish economy, family firms are proceeding with caution and although owners may be confident in their competitive position they are tending to hold back on investment.
Entrepreneurship is a key part of the most successful family businesses. It is, therefore, a key challenge for family businesses to ensure this skill is harnessed and refreshed through the generations to master successful stewardship of the family business and nurture its cultural DNA – their way of doing business.
(that’s anyone born from 1982 through to 2001) Generation Y was until recently, dubbed ‘the arrogant generation’. This social group was brought up during a long period of economic growth in a multi-cultural globalised world where jobs and money were plentiful. As a generation they are less inclined to worry about the future, more predisposed to living in the moment and shy away from planning for the future. They believe work should ‘fit their profile’.
The recession though has taken its toll on this care free population and their confidence dented by the rise of youth unemployment and a flagging UK economy. However, this current tough climate provides the perfect breeding ground for Generation Y to flourish. Using their digital knowledge and aptitude, they can create businesses, promote ideas and acquire markets for new ventures with a few clicks of their mouseand with minimal capital. Tapping into the mindset of Generation Y is the missing link in the chain that will eventually haul the UK out of the downturn. It is, therefore, crucial to invest in the ‘Next Generation Y’ which the astute leading family businesses recognise and are doing.
Thinking of a family business in terms of how an airport operates can help. In large, complex organisations, the next generation member needs a lot of ‘runway’ to ensure success whereas in a smaller, less complex business a transition might be successful without a lot of ‘runway’. Constant communication with air traffic control is mandatory. In family companies the senior generation commonly act as air traffic controller as they tend to have a clear understanding of the business environment and think they are in the best position to make next generation leaders aware of the dangers. If the air traffic controller chooses not to communicate effectively with the pilots, many people will be in danger and chaos will ensue around the airport. The same is true in family businesses.
Within the BDO Centre for Family Business I work with many family business clients helping them in preparing family charters – a kind of business plan for the family that identifies the governance and core principles which will inform any future decisions. This moulds together old and new ideas from the senior and next generation to achieve best practices, a shared vision and goals for the family business as it transitions through the succession process. It also minimises disruption in the family and the business. Most business schools don’t teach family businesses to deal with the psychological issues that affect families especially during a transition and this needs dovetailing in with preparing Generation Y. Just as a commercial pilot logs many hours alongside a seasoned professional, so must the next-generation Y business leader take a patient and diligent approach to training and preparation with open communication. To read more about BDO’s offering for Family Business please visit www.bdo.uk.com/sectors/family-business