Leading a legacy: Family business leaders share their experience
Inheritance, generational change, and no arguments about Brexit: this wasn’t your average family lunch discussion. Investec brought together some of the most successful UK family business leaders to discuss the unique set of issues they face. In the process, they shared their decades of experience on how to handle tricky challenges such as succession planning, establishing your vision, and maybe the most delicate topic of all: when to let go?
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In uncertain economic times, keeping it in the family would seem to be a strong business model. But such a structure brings with it various opportunities and challenges that must be navigated with care to avoid straining family relationships. Investec’s autumn Founders & Family Business Lunch, hosted at the family-run Goring Hotel in London, saw a dozen leaders discuss some of their most pressing issues.
The discussion was led by Jonathan Warburton, Chairman of Warburtons, the UK’s largest bakery brand, and included leading figures in sectors from technology and industrials, through to media and food and beverages. The group possessed a wealth of knowledge, extending from founders to fifth-generation family businesses.
When and how to let go
The compelling nature of the conversation highlighted how letting go is one of the most difficult issues facing leaders of family businesses and one with which many struggle. Succession planning is an experience universally shared by family companies but is fraught with challenges. Its prevalence and complex nature were reflected in the fact it was the most frequent topic of conversation around the lunch table.
It’s an incredibly personal decision and no two people will approach it the same way. For a lot of people in the room, this has been their whole life. However, for others, it’s their second or third business, so they didn’t face the same emotional hurdle about letting go.
Deciding when to exit is one thing, but how do you then execute the transition? For many, an overarching concern is deciding when to walk away and whether to let family take over, hire professional management, or sell the business. Wrestling with thorny questions such as is the next generation up to the job, how will handing over the reins affect family dynamics and legacies, or do you ever see yourself retiring, can add up to some difficult choices.
The discussion further showed that while a lot of focus in succession planning goes on technical aspects such as tax arrangements and trusts, just as important – if not more so – is the people side of the process, such as managing family communication, expectations, values, competencies, and sibling dynamics.
'It’s about how you can progress the story as it gets handed over to you from the previous generation'
According to Edward Thomas, Corporate Finance Director at Investec, “the best advice was to make sure you start planning your succession early, and to make sure everyone knows what your desired outcome is and what role they will play in that. That means carefully managing any sibling and wider family relationships to avoid conflict.”
One lunch participant who runs a global hospitality chain said from their experience it’s vital to get a professional and trusted third party adviser involved early so they can lead the discussions about succession, as opposed to a family member who could be seen as having a “hidden agenda.”
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Cutting your path and sustaining success
Following on from succession, the discussion turned to a critical choice new leaders face when taking over a family company:
Do I continue on the same path as my predecessor, or do I reshape it according to my vision? The choice was succinctly summarised by one lunch guest as either ensuring a primary focus on being best in class by continuously developing the core business, or diversifying the business beyond its heritage.
“It’s about how you can progress the story as it gets handed over to you from the previous generation,” Thomas said.
“It puts pressure on people to feel they should be trying to push the business forward and continue to succeed and grow – whether that is a case of just carrying on what your father and mother have done, or do you push things in a new direction?”
In making such decisions, our lunch guests agreed they have one big advantage over non-family companies: having your name on top of the building. This gives you a greater license to surround yourself with the best people without the underlying fear of being replaced by someone smarter than you.
“No-one is going to fire you, so you should feel comfortable hiring the best people around you,” said one guest.
Given that the lunch discussion had already covered a lot of sensitive ground, it was surprising that today’s touchiest subject wasn’t raised: Brexit. But that may be down to the long-term perspective of family-run businesses.
“That’s what they wanted to talk about, not external factors which they have no control over,” Nelson said.