have a documented, formalised, costed strategic plan for next 3 years
expect to bring in experienced professionals to help run the business in next 2 years
have the next generation working in the business
cited succession as one of their top two key challenges over next 2 years
“In family businesses, you can see a huge change in the business when the next generation want to be involved because they’ve got a fresh ethos and attitude.”
Family businesses are having to navigate a faster pace of change than ever before. This provides a clue to why attracting external help to grow the business is increasingly a priority. Nearly half of UK respondents are planning to bring in experienced professionals from outside the family to help them run the business.
“Today’s generation have a range of opportunity for learning and experience open to them, that will enable them to bring a greater range of skill sets to the business.”
As well as recruiting externally, 69% of our participants expect their next generation of family members to get experience outside of the family business, bringing a fresh injection of ideas and approaches to help the business innovate and keep ahead. Given how important the next generation are to their lasting legacy, it is surprising that less than a third of family businesses in our survey have involved them in their plans to pass on the business.
Whilst many want the next generation to take the business forward only 18% have a plan written and documented. Aside of all the practical business continuity risks this poses, this lack of transparency and engagement has the potential to break the family. The next generation need time to build a collective sense of purpose and be supported in developing their own framework for success.
Our conversations with family businesses show that often they recognise the need to start the process, as 53% of those with no plan are intending to develop one, but the conversation can be difficult. Timing is crucial and so is communication to all stakeholders. The majority of those with a plan told us key people within the business were aware of the succession plan, however only half have discussed their plan with other family members.
“Planning for continuity never stops, just as the family never stops growing, changing and evolving.”
Bagnalls plans to continue its legacy of not only being owned, but managed by family members. In 10 to 15 years it will be time to hand over to ‘generation six’ and Bagnalls is already starting to identify and encourage those who may be interested in joining the firm. While it is not yet clear who the successor will be, whoever gets the ‘top job’ must go outside of the company for three to five years first to get experience in a completely different business. They believe it is absolutely imperative to have a much wider perspective.
Strategic planning and succession planning together are key to the successful continuity of family businesses. Father and son, Trevor and George Herbert, Chairman and Managing Director of Hobbs House Bakery believe that to be the best they can be in everything requires planning. As a fifth generation family business, Hobbs House Bakery knew they had to get succession right first time. George Herbert needed to be part of the succession planning to be empowered in his new role as Managing Director, to set the vision for a fast-changing world that allows the business to adapt to new markets, new technologies, and changing consumer expectations.
“We recognise the company has now grown to a level where we need to have key staff with specialist skills and experience to complement and support the family directors and employees.”
Many of the family businesses we spoke to recognise they need to invest in their lasting legacy. At Stephensons, Henry Stephenson as a new Managing Director worked with a mentor through the business planning process. Henry found it really helpful because it really challenged him to understand what they needed to do as a business. For Owens Group investing in the next generation has driven growth over the last three years and they continue to make sure the right skill sets are there to support them.
For families where the next generation is looking to be less hands on, but recognising the potential commercial advantages a family business brings, the appeal of family offices is growing. Particularly attractive where the next generation has many members; this model is not without its challenges like how to preserve values and culture to maintain competitive edge. Choosing this path requires a clarity of purpose and a clear sense of the legacy businesses want to create; only with these factors in sharp focus will they be able to guide, empower and motivate the business leaders to deliver for them.
“We want to make sure we’ve got a wonderful, sustainable business to pass on to our children so they can have a go.”