Date: 06/03/2008 Publication: The Times Family business is often regarded as the corporate equivalent of a dusty heirloom. Yet beneath the images of quaint corner shops and parochial father-son outfits, the modern family business sector has serious clout. Last month the Institute for Family Business (IFB) estimated that family firms account for 65 per cent of the UK’s 4.6 million private sector enterprises. Family businesses were also found to be more stable and profitable than other firms. “They stick to the fundamentals and take a long-term view,” says Professor Nigel Nicholson, of London Business School. One reason that family businesses succeed is “emotional ownership”, he says. “You don’t have to be an owner of stock to have a sense that it’s your business. You’re actually part of it and the responsibility is a great motivator.” Simon Tate always knew that he would join the family firm “at some stage”. Then, in his final year of university, his father was found to have cancer and died six months later. Equipped with a business degree, at 22 Tate became the managing director of Wallace, an international pharmaceutical company. “It was a fast learning curve,” he says. “I’d be lying if I said we didn’t make mistakes. The biggest challenge was not wanting to let anybody down.” After seven years at the helm, he launched a spin-off, Kew Health & Beauty. Family firms are a springboard for enterprise – the IFB found that most start-ups originate this way. Entrepreneurs often have the advantage of financial support, but culture plays a part, too. “I grew up in an environment where there was always business talk,” Tate says. Andy Wates, 38, the managing director of Wates Interiors, part of Wates Group, joined the 110-year-old construction firm after an initial stint outside. “I was acquiring the skill set that enabled me to join.” While one strength of family firms is being able to make decisions quickly, they also face unique threats. The IFB says that divorce or sibling disagreements can derail a successful enterprise. “The key to a successful family business is unity,” Wates says. He is a shareholder along with two cousins: they avoid the dangers of rifts by sitting around a table until consensus is reached. The firm is also insistent on hiring on merit: insularity, while it undeniably exists in some firms, is bad for business. Wates has performance reviews and is assessed by external consultants. “It can be quite destructive if you put someone in who’s not up to it,” he says. Being hired on talent is important for the firm and for the employee. For graduates it can be a tough call: prove yourself in the wider world first, or join the family firm and accept the slurs of nepotism? “I don’t tell people my surname,” says Tom Barrett, 25, a sales manager for Barrett Steel, whose father is the chief executive. In sales, numbers are vital to earning colleagues’ respect, he says. “You can’t manage people otherwise.” He was recently appointed manager of a team of 14, despite being the youngest. “If I don’t keep showing what I’m made of there’s no way they can promote me ahead of someone else,” he says. The “something to prove” mentality can propel someone up an already more obvious ladder, Professor Nicholson says. The sector still suffers from “eldest son” stereotypes and a male bias persists. But the IFB has found that women in family firms tend to do better than outside. “If the parents are thinking people then women [can] take up prominent positions much younger than if they’d followed a conventional path,” Professor Nicholson says. Mother Nature also plays a part: Wates has two young daughters and says the next generation is predominantly female. “Providing they want to make their career in the firm, they’ll have my full support.” Back to Articles | |