IFB

Responsible capitalism: a contradiction in terms?

2012-01-26T10:33:00.000Z

http://www.ifb.org.uk/ I was an invited guest at the Prime Minister David Cameron’s speech on the market economy where he invoked a wish to see the rise of popular capitalism with a social conscience. His speech followed close on the heels of Vince Cable, Ed Milliband and Nick Clegg, all of whom have been calling for a commitment to responsible capitalism.

Nailing his colours to the capitalist mast the PM acknowledged that the pursuit of enterprise and opportunity are what lies at the heart of a thriving economy, where the most capable are rewarded for success. At the same time he wants to promote an economy where more people have a stake in the success of their business- this could be by way of share ownership, or as being part of a mutual co-operative. Deputy PM Clegg has talked in a similar fashion wanting to support more of a John Lewis style economy with employees participating in ownership.

But are the market and a social conscience compatible bedfellows? The general media frenzy around pay echoes a popular view that big business has tarnished its reputation, driven by unjustified bonuses and pay differentials and excesses that lead to the financial crisis.

Maybe the key to success lies less in whether employees have shares in their employer, but more about how companies are driven by the right set of values, creating great workplaces.

It won’t surprise readers to hear that family businesses are often the winners in terms of employee engagement and commitment - because the best firms stand out for their clarity of purpose and values. Recent research showed that family businesses inspire greater worker loyalty, and feelings of greater job security and inclusivity than all other employers in the public or private sector.

Patient capital - the elephant in the room

2012-01-12T16:12:00.001Z

http://www.ifb.org.uk/ I was part of a delegation of family business owners that met with Mark Prisk MP, the Business Minister, on Monday, together with other mid-sized business (MSB) leaders for a roundtable discussion on growing the MSB sector. In the recent Government report on MSB firms (turnover £25 - £500M) family businesses accounted for nearly half, (5,000 firms) making them critical to the success of the sector. The report also highlighted the strength of many of these companies as engines for growth, but also the challenges competing with countries such as Germany with its Mittelstand of mid-sized companies.

One of the lesser known values of MSBs is their belief in the benefits of “patient capital”. At the meeting John Cridland, Director-General of the CBI, which has published Future Champions - its own report on MSBs - described the issue of ‘patient capital’ as the elephant in the room. By mobilising this capital the CBI estimates that there is the potential for MSBs to contribute an additional £20bn to the economy by 2020 creating new ‘national champions’.

Critics could argue that a speed-dating culture has emerged in business where short-termism predominates - entrepreneurs start up ventures, grow them and exit at the earliest opportunity. Quoted Plcs have also been accused of taking short-term decisions driven by the stock market’s focus on quarterly results. Short-termism has become embedded in our DNA.

On the other hand the values associated with stewardship and long-termism have been less fashionable. Successful MSB family businesses often embody ‘patient capital’ values supported by stable ownership that prioritises long-term investment, progressive employee relations and a culture of continuous improvement within their businesses. The MSB Growth review is focusing Government’s attention on this vital part of the economy – and family buisnesses will be at the forefront of this drive for growth.

Succession planning in family firms - spreading best practice

2011-12-14T12:38:00.000Z

http://www.ifb.org.uk/ The press has recently highlighted criticism of family firms by Professor John van Reenen, of the London School of Economics in a Department for Business, Innovation & Skills (BIS) sponsored report on UK Management Practices, who has blamed poor succession choices in some family firms (p34) for dragging down the sector’s overall performance. Perhaps not surprisingly his research highlights that family firms whose management is chosen on a merit-based policy, have higher productivity than if recruitment of a CEO is restricted to the family gene pool.

It has therefore been pleasing to see that as a direct result of IFB lobbying the Government announced that it will work with business schools to enhance the family business management content in their MBA programmes, so that future family firm leaders are better able to deal with issues such as succession planning.

Indeed getting succession management right is critical to ensure the ongoing success of the organisation. For family firms it is especially important – to help owners the association has published a Family Business Perspectives guide on the subject and succession planning will continue to be a core theme at IFB Forum events.

We are also working with BIS to deliver additional resources to family firms, particularly mid-sized businesses, including more web based information and a new series of seminars on governance and succession planning. This call has been endorsed by Lord Heseltine (pictured), an IFB member, who advocates a stronger role for trade bodies, as is the case in Germany, by ‘spreading best practice and improving performance’.

Family business champions look to export markets

2011-11-25T12:10:00.001Z

http://www.ifb.org.uk/ It was good to see family businesses taking centre-stage at the CBI national conference this week. Fiat, CEO Sergio Marchionne, and IFB members JCB represented by Corporate Development Officer David Bell and Kilfrost CEO Gary Lydiate took turns to share their success stories of business internationalisation.

They were addressing the conference theme as set out in the CBI report Winning Overseas which examines how the UK can boost its declining export performance. It was a subject also discussed by Jim O’Neill, Chairman of Goldman Sachs Asset Management who told delegates that the opportunities for growth were huge for firms focused on BRIC – a term O’Neill himself coined - and other emerging economic powerhouses including the Next Eleven.

Each of the family businesses dwelt on common themes; having a clear strategic vision underpinning the company’s export goals; training and developing the talent to deliver the plan; making investment commitments that can stretch out to long-term horizons; using wide ranging marketing tools - as simple as hosting client events in British Embassies; developing know-how and intellectual property; taking a strong ethical stance on bribery; and reaching decisions based on values – perhaps sacrificing short-term profit.

Gary Lydiate, CEO of Kilfrost, (pictured right) said he had gone “cold calling” for business in China five years ago. His advice was that “you must go and visit these places; understand the culture.”

Each of these family businesses have larger competitors, but through carefully developing and deploying their resources they all enjoy strong competitive positions and are all definitely family business champions.

Entrepreneurship in the family office

2011-11-16T11:09:00.001Z

http://www.ifb.org.uk/ Family offices, perhaps driven by the need to support an expanding shareholder base, are turning more to entrepreneurship. This theme emerged at the recent IFB 7th Annual Family Office Forum Roundtable chaired by Family Office expert Daniel Goldstein.

While entrepreneurial activities are inherently risky a ‘stay rich’ approach will not usually generate big enough returns to create significant new pools of family wealth. Family offices face other pitfalls, such as a lack of new ideas or over investing, sometimes leading to stagnation or decline.

There is also the risk that family members become over dependent on dividends and are lulled into complacency and a false sense of financial security. Balancing a traditional financial investing strategy with an entrepreneurial approach can therefore play a central role in giving the family office a new lease of life.

A good starting point is setting out the family’s values - particularly making explicit the family’s appetite for risk taking. Keynote speaker and family adviser Francois de Visscher (pictured left) encouraged families to reach beyond ‘outer wealth’ such as assets and find ‘inner wealth’ embodied in the family’s values and legacy.

When successful families put family office entrepreneurship into practice they encourage those next generation family members, who have the passion, knowledge and drive, by lending them moral support and resources.

Once embarked on its entrepreneurial strategy the family office must stay focused: one boss, one team, one board for every project or investment is the answer according to one successful family. Failure should be expected, but as long as lessons are learnt it is not the end.

By each family office discovering its own entrepreneurial strategy not only can wealth be created, but family values will be sustained potentially paying rich rewards over the long-run.

Four ways to gain the best non-family executive talent

2011-10-27T16:59:00.002+01:00

http://www.ifb.org.uk/ A recent survey by the global executive search firm Egon Zehnder International puts the spotlight on strategies for family firms to compete for top talent. Perhaps not surprisingly some of the main tips include: creating greater separation between owner and company interests, making decision making paths more comprehensible and offering stronger career prospects – with less glass ceilings. For family owners this should mean one thing - placing greater emphasis on governance to help focus on achieving these outcomes.

The survey has positive messages too about the family business model and how a long-term approach to stewardship helps support innovation. But conflict too often gets in the way, according to respondents, principally because of questions arising over the merit of family members working in the business. Lack of career prospects is also a major factor for those senior executives who might otherwise contemplate working in a family business. The best firms address these issues by

improving family and corporate governance
raising their profile promoting their corporate brand
recruiting not only on skills, but also taking values into account
having formal processes for integrating non-family managers

The next IFB Governance Forum in London, on 29 November, will continue this debate looking at the role of the non-executive director in upping the game in family boardrooms.

UK family businesses as world class exemplars

2011-09-09T17:28:00.002+01:00

http://www.ifb.org.uk/ At the PwC Private Business Awards many of the Britain’s 'hidden champions' were on parade and family firms gave a powerful show of strength by clinching the main award. The awards demonstrated that the UK’s private business sector is not short of world-class exemplars. The firms competing are committed to growing and want to raise their brand profile to attract better talent to help win the race.

UK home appliances brand Dyson was lauded as the Private Business of the Year. The company, which is transitioning into the second generation, has become a market leader by focusing on design and innovation. Dyson recognise they play an important role in the rural Wiltshire community where they are based, and their values have helped keep employee turnover relatively low.

The Family Business Award, presented by the IFB was won by Samworth Brothers which has values that revolve around a constant respect for people, quality and profit. Supported by a commitment to training they have created a performance culture that has driven their success.

And recognising the importance of exemplary leadership Paul Drechsler, Chairman and CEO of another family firm, Wates, was awarded CEO of the Year. Paul is passionate not only about the business, but also the family, people and communities that the business supports and depends on.

Other exemplars awarded include Monsoon, the International Business of the Year, where Peter Simon has led his family business back into private ownership, regaining full control over their destiny. Performance has been outstanding since the company regained independence. Their Accessorize brand has been powering international sales which have grown strongly across 68 countries where they trade.

Family businesses rise to the challenge of the UK riots

2011-08-25T17:51:00.000+01:00

http://www.ifb.org.uk/ The UK summer has been blighted by riots in London and other cities across the country. David Cameron has lamented the nation’s ‘broken society’. In some quarters citizens appear to no longer respect the importance of good neighbourly relationships. And in the midst of all this family businesses have also been in the spotlight.

The House of Reeves in Croydon was torched by rioters. Just a few hours later, this father and sons firm with 144 years of history was back in business, ordering new furniture from China to keep customers happy. The Reeves family, who are great exemplars of resilience, have been inundated with expressions of support and have set up a special fund to help to regenerate the area that was vandalised.

Carpetright, another retail organisation with over 500 stores in the UK and Europe had their Tottenham store destroyed by rioters in attacks that affected the tenants living above the store. The company Chairman Lord Harris of Peckham, reacted immediately by offering a helping hand to the tenants, even though he is not their landlord. He took the view that they had suffered unfairly because his store had been the target of the vandals attack.

Both these cases are prime examples of how the values of family businesses and their owners can help plug a nation’s social capital deficit. For these family businesses their communities are vital; the community and the business work hand in hand to mutual benefit. So when adversity strikes solidarity kicks in. The Harris and the Reeves stories are powerful examples of family business capitalism at its best and should receive our praise and support.

To donate to the House of Reeves see www.houseofreeves.com/fire-at-house-of-reeves/i60

Murdoch lessons: Business before family

2011-08-15T11:26:00.001+01:00

http://www.ifb.org.uk/ Family business has been at the top of the news for the wrong reasons recently with the News International scandal. The events surrounding the despicable phone hacking practices at the News of the World demonstrate that any organisation that does not embed their values throughout the organisation can face the loss of the whole or part of their business as soon as trust breaks down. A look at the News Corporation website lists pages of compliance policies in box ticking fashion, but fundamentally values are about people’s behaviour that rules alone can’t dictate. The responsibility of leaders, such as Rupert Murdoch and his son James, is to set the example through their actions that others will follow.

The questioning in the media about leadership in this family controlled business will go on. Responsible owners put the success of the organisation ahead of their own personal interests, and it is understandable that there are calls for a new CEO at News Corporation and that the board revisit the family’s role in management. This could be a good time for the Murdoch family as owners, to make a bold move and change their roles, leaving strategic management in the hands of their team of professionals, to become cultural ambassadors for the business. The family’s principle role would be to take responsibility for embedding strong values throughout the organisation in order to rebuild the trust of all stakeholders.

The enterprising family office

2011-07-15T17:32:00.000+01:00

http://www.ifb.org.uk/ London is becoming home for an increasing number of family offices. A family office generally refers to a private company that manages investments for a single wealthy family. The company's financial capital is the family's wealth, often accumulated over many generations.

At a recent gathering of the IFB Family Office Forum owners were privileged to hear from author and consultant Mark Daniell who wrote Strategy for the Wealthy Family and other acclaimed books. One of Daniell’s themes is why only one of the 30 wealthiest families in the first edition of the Forbes “Rich List”, the Rockefellers, is listed today whereas the other 29 families have dropped away.

At the heart of growing the family’s wealth, and not just preserving it in the family office, is the need to maintain the entrepreneurial zeal and appetite to innovate and grow in each generation. Keeping this flame burning begins by instilling behaviours into the next generation that will encourage them to take entrepreneurial risks and make their own mark. The best family offices foster core values in the family such as dignity, accomplishment and responsibility.

Whether family office investments are made up of operating, or financial assets, the key to longevity is the positive engagement of the next generation. If the family business has been sold there could, of course, be a loss of identity so agreeing common values among owners and a shared mission becomes critical in order to retain unity and a sense of purpose. Recent IFB Next Generation Forum speaker Ben Goldsmith, who now chairs his family office, also highlighted the importance of strong leadership as another vital ingredient.

On September 28th when the IFB hosts its annual Family Office Forum Roundtable families will share their own experiences on how enterprising businesses manage to keep the entrepreneurial flame burning and grow their wealth. The debate goes on….

Family business: The Freedom to Lead

2011-06-17T10:49:00.001+01:00

The debate over the demise of Cadbury which was once a great British institution has not died out in the news. Another family business brand Timberland was also sold this week by a family who decided that they were no longer the best stewards of the business.

Family firms who have stood the test of time and fought against the odds, require a unique and sturdy set of genes to survive. They need a clear purpose, strong values and great leadership supported by good governance. If that was not difficult enough they also have to manage the process of generational transitions. Strong leadership establishes clarity of vision and values; this is arguably the starting point for effective stewardship as we set out in the IFB's new report Family Business Stewardship.

Most successful family business owners say time and time again how the freedom to decide is one of the key attributes in achieving success. They can use their independence to make decisions to invest and innovate, where the returns may not be visible in the next quarter.

Of course, shareholder loyalty should never be unquestioning; the best stewards stand back and take a dispassionate view of their organisations. With a board supported by a small group of challenging non-executive directors the right questions can be asked.

The best of family firms are working day in day out to ensure that their owners are well educated for the long journey ahead, with the knowledge and questioning skills that are required to be good stewards of their organisations. To succeed, where others such as the Cadbury and Timberland gave up the fight, is highly demanding. The reward can be great when measured in pride in seeing the name above the door of a successful business where the owners retain their independence and freedom to lead.

Taking the long view

2011-05-25T17:32:00.000+01:00

http://www.ifb.org.uk/ Recent press comment in the Financial Times by Sir Richard Lambert laments the myopia of the UK stock market’s obsession with short-term performance. He cites Rolls Royce as a special case that was sheltered from market predators by the UK Government’s golden share. It allowed the firm the freedom to make investments that would take years, if not decades, to yield returns in terms of a strong cash flow. Shielded from mergers and acquisitions style short-term behaviour and a policy of robust investment in R&D, people and capital equipment, Rolls Royce has gone from strength the strength to become a world leader in its field.

Similarly family firms often eschew the public markets to retain the independence that enables them to take bold investment decisions that might not yield strong results in the short-term. Danny Miller and Isabelle Le Breton-Miller argue in Managing for the Long Run that family businesses that pursue a long-term agenda derive competitive advantage. However there is a real danger in this debate that we lose sight of the need to achieve a balanced focus on the short, the medium and the long-term. Near-sighted goals are vital in any organisation. People in modern organisations are appraised regularly and held accountable for goals that stretch over different time horizons. Each business sets its own pace, but like athletes in a long-distance race the runner who wins is able to release effort in a calculated manner with short bursts of speed balanced with stamina.

In successful family businesses there will be short-term aims and objectives sitting alongside a well articulated long-term strategy, where owners strike a balance between short-term return and a willingness to apply their financial capital with patience. It's a subject that we address in further detail in the IFB Family Business Stewardship report, in partnership with Tomorrow's Company, which will be published on 9 June at our 10th National Conference.

Social Enterprise and family business

2011-04-20T11:14:00.001+01:00

http://www.ifb.org.uk/ The world is witnessing the emergence of new business models where entrepreneurs with a social conscience are creating an impact while making their venture financially sustainable. The growing emergence of this form of business, known as social enterprise, is an area where the UK sets the pace.

For family business owners awareness of these new models is highly relevant; for example in terms of how social enterprise can form part of the business’s supply chain or indeed how next generation family members could see social enterprise as part of their career development.

The IFB Women’s Forum recently visited the acclaimed School for Social Entrepreneurs (SSE) in east London. This organisation helps develop business projects and provides training and opportunities for people to use their abilities more fully for social benefit. One of the enterprises SSE supports is Bikeworks, based in Tower Hamlets, which provides cycling for all, encouraging the health and wellbeing of everybody in their community. In three years of trading the co-founders have built a business making significant social impact with revenues approaching £1M, and now poised to expand their brand across London.

In another example social entrepreneur and former scientist Sheenagh Day was inspired to establish Maison Bengal a fair trade company, producing high quality home and gift accessories, whose philosophy aims to improve the lives of communities in Bangladesh by developing a sustainable market for their products. The business sells its products through retailers such as Heals and the White Company and has helped thousands of women and their dependents.

These successful companies show how blending strategies from the for-profit world with the social aims of Non-governmental organisations and charities can deliver a sustainable positive impact.

Business leaders and good stewardship

2011-03-25T13:28:00.004Z

Cover via Amazon

www.ifb.org.uk Ken Costa, Gresham College Professor and Chairman of Lazard International, addressed an IFB Forum this week on the need for business leaders to act in a morally, spiritually and financially responsible fashion. Leaders who act as good stewards develop the people they are chosen to lead—the opposite of old-fashioned coercive leadership.

Speaking at a meeting hosted by Saunderson House in London, Costa, who is also author of God at Work, emphasised the importance of values and how leading up to the financial crisis society had arguably been sidetracked by self serving principles. Adam Smith’s system flourishes best where it focuses on delivering profitable enterprises, long-term sustainability and retains a strong regard for impact on communities. To remain healthy capitalism has to remain a servant and not become the master.

Capitalism however requires checks and balances to help to regulate the behaviour of the human actors involved. The rebuilding of trust is an important factor in emerging from the crisis – indeed you can’t operate the capitalist system without a strong degree of trust.

Family firms have a strong role to play and the best of them have avoided the traps of the crisis by not chasing short term gains. A minority were lead astray by leaders who borrowed heavily following the fashion of the times. On the other hand many of the best family businesses are largely detached from both the debt and equity markets and take the long term view.

Costa sees a strong confluence of emotional and patient capital at work in business families, citing Harrods as an example. Successful family businesses are able to leverage their emotional and financial capital and deliver a robust performance.

BBC's 'Can't take it with you' programme and succession planning

2011-02-14T12:21:00.004Z

http://www.ifb.org.uk/ In the latest episode of BBC2’s 'Can't Take It with You' the seasoned business guru Sir Gerry Robinson and Withers partner, Sue Medder, encounter two family businesses and the problems that can arise for the senior generation when considering succession.

When dealing with generational transition in family business, it is important to consider carefully how best it should be passed on to the next generation, taking care to ensure that an acceptable balance is struck between the interests of those family members who work in the business and those who do not, whilst also trying to ensure the continuation of the business as a going concern.

The two cases in the TV programme highlighted the most frequent problem facing family firms, and particularly those with ageing owners: a void in succession planning. Surveys of owners demonstrate time and time again that they put their heads into the sand sidestepping sometimes painful conversations with key stakeholders - particularly with their own children.

Communication is the key to unlocking the way forward, including a mix of one-to-one discussions and bringing all the parties together around one table. The programme also usefully demonstrated how external intervention by a moderator can play a vital role in bringing objectivity to an emotional situation and addressing tough questions that may have been swept under the carpet.

Drawing up a will plays an important part in such a process as it sets out how ownership and management of the family business will be dealt with when the seniors have passed away. Such a document becomes much easier once there has been open dialogue and engagement with the key stakeholders to try to understand everyone’s goals and how individual family members can find ways to work together.

Related articles

Family business entrepreneurs: the pros and cons of family support

2011-02-07T16:13:00.001Z

http://www.ifb.org.uk/ The recent sell-out IFB Next Generation International Convention on entrepreneurship was a tremendous success as 185 young delegates from 25 nations listened to inspiring speakers on starting up companies, intrapreneurship in an existing business and emerging social enterprise models. The consensus seemed to be that today’s young family business members want to make their own mark in the early stages of their careers, either by working in a non-family company, or increasingly by setting up their own business. Choosing the entrepreneurship route is becoming more popular; it gives the young person more independence and is a great way to prove yourself, at a stage in life when there is often little to lose.

One of the most active questions discussed was the pros and cons of having “family support” when starting a new business. Advantages include access to capital, ready-made networks, other support that the family (and perhaps its business) can provide and the pressure to succeed. On the downside many felt that using family resources including funding could lead to a lack of independence and thus a loss of freedom for the entrepreneur.

Lara Morgan, founder of toiletries success story Pacific Direct, told the story of how she broke away from her father’s firm at 23 and never looked back eventually selling her business for £20M. She argued strongly in favour of having full control over one’s destiny without anyone looking over your shoulders. Others argued that family entrepreneurs should welcome family support. If a family member starts a new venture family capital and networks can be invaluable; but if the family are investors care needs to be given to the governance system that should give the entrepreneur the freedom to manage, with a good board in support.

Family Business Stewardship - a model for business success

2011-01-10T15:32:00.001Z

http://www.ifb.org.uk/ The debate on the principles of good ownership very much came to life at the height of the recent financial crisis. Corporate failures, such as Lehman Brothers, raised questions about the health of capitalism and whether it was always working for the benefit of society as a whole. Politicians and the media called on owners to be more accountable and to ensure that their companies treated stakeholders fairly and acted as responsible corporate citizens.

Tomorrow’s Company, a think-tank that aims to reduce the gap between business and society, stepped in to the debate with the publication of a report “Tomorrow’s Owners - Defining, Differentiating and Rewarding Stewardship”. The report, to which the IFB contributed, defined stewardship as the active and responsible management of entrusted resources now and in the longer term, so as to hand them on in better condition. The report set out four principles for corporate stewardship, and related behaviours:

• Principle 1. Setting the course: attention to clarity of purpose

• Principle 2. Driving performance: attention to performance and improvement

• Principle 3. Part of the landscape: attention to the wider world

• Principle 4. Planting for the future: coherence over time

Throughout this recession the family business sector has been held up by observers, such as the CBI, as a source of stability. Although the trading environment has been very difficult family firms have generally held a steady course. Arguably one of the reasons for the success of family firms during tough times is their adherence to the four stewardship principles.

A leading example of family business stewardship in action is Wates Group who place respect for communities and people at the heart of their business. This approach has earned them the prize of Major Contractor of the Year for a second consecutive year at Building Magazine’s awards.

The IFB Research Foundation has partnered with Tomorrow’s Company to examine empirically how family businesses function in terms of the stewardship and to find out if this is a model for business success. If you would like to participate in the debate about family business stewardship please leave a comment here or email your views to info@ifb.org.uk .You can also request a copy of the IFB Family Business Stewardship Report that will be published in June 2011.

Strengthening the family business corporate brand

2010-12-20T17:07:00.002Z

http://www.ifb.org.uk/ Sir Michael Bibby, chief executive of Bibby Line Group was the final breakfast speaker at the Next Generation Forum in 2010. His comments underlined the importance of the family business corporate brand as a magnet to help recruit and retain employees motivated to perform at their best. Sound values at Bibby including a focus on the long-term, quality operations, trust in people and support for communities, is part of what makes people “feel like they work for their own business” as Sir Michael puts it. By promoting a strong sense of goal alignment employees are selected both for their skills and whether they share the values of the business.

These insightful comments echo throughout the family business sector. Each family business works to reinforce the foundations of its corporate brand; underpinned by the origins of the family business, the reputation of the firm is carefully developed and shaped over time. Good stewardship leads to employees being more motivated, with retention increasing as they align withthe underlying sense of mission and values of their organisation.

Developing trust with consumers
Consumers are also savvy and want to know about the organisations behind the products and services they buy; convincing them for example that the business has sustainable and responsible sourcing policies can be a powerful differentiator in favour of the family business corporate brand. UK family business company brands such as C&J Clark, Wates and Bibby Line Group are examples of organisations where a strong corporate culture underpins successful business practices developing trust with their customer base.

In 2011 part of the IFB’s work will be to find out more about how these and other family firms have found a winning formula.

Brazil's Thriving Family Businesses

2010-11-30T13:44:00.001Z

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http://www.ifb.org.uk/ Visiting Brazil as part of an IFB and Pi-Capital delegation of family business owners and entrepreneurs, last week, gave me a unique opportunity to meet leaders at the forefront of driving the growth and development of this rising global powerhouse.

The programme organised by Leaders Quest, included meeting Persio Arida, managing partner of BTG Pactual (Brazil’s leading investment bank) and Arminio Fraga, head of Gavea Investimentos and former President of the Central Bank of Brazil. Both are respected public figures and provided upbeat assessments on the outlook for their nation which is forecast to emerge as the world’s fifth largest economy. The UK’s Ambassador Alan Charlton also echoed this in a speech to the delegation.

A wave of optimism is sweeping across Brazil and the sense of opportunity is heightened by the fact that it will be hosting the World Cup in 2014 followed by the Rio Olympics in 2016. Meeting well known family-controlled business groups such as Camargo Correa, Odebrecht, Wilson Sons and members of FBN Brazil we saw strong signs of investing for growth. These groups, and others we visited, are achieving long-term sustainable performance, focusing on more than just financial results by strengthening their human resources to drive further growth. In a nation with wide disparities of wealth, there are barriers to social mobility partly due to weaknesses in the education system. The leaders we met are supporting social enterprises that are working to address these and other social issues. Some of the most progressive social entrepreneurs we met include internationally renowned Rodrigo Baggio, of CDI and Dr Vera Cordeiro of Saude Crianca; these and others showed us how their organisations are tackling some of the most endemic issues in their society.

Progressive governance practices are seen as key to enabling Brazil’s leading family controlled groups to achieve clarity in their vision for growth and combined with sound values Brazil’s family business sector is well placed to contribute to driving economic development. Buoyed by an expanding middle class the Brazilian market for goods and services consumption is set to grow, assisted by growth in exports of minerals and commodities. With the scourge of inflation now seen as a historical phenomenon the risks for Brazil veering off course appear to be limited.

Entrepreneurship - the pursuit of opportunity

2010-11-08T11:17:00.001Z

http://www.ifb.org.uk/ I’m looking forward to hearing the opening address by Professor John Mullins, of the London Business School, at the IFB’s Next Generation International Convention 2011 in January. The convention’s theme is Entrepreneurship – the pursuit of opportunity and as associate professor of management practice in marketing and entrepreneurship, Mullins is an acknowledged expert in the field.

Professor Mullins will be developing some themes from his latest book Getting to Plan B, where he debunks the form-filling, spreadsheet-driven mentality popular in business planning. Mullins believes that entrepreneurs should adopt a series of ‘stress tests’ to their initial ideas so that any weaknesses can be corrected. He suggests that the real success of companies such as Google, PayPal, Starbucks and others was that they were prepared to rip up Plan A and make radical changes to their business model.

Cover via AmazonHe has also identified two other key criteria for any successful enterprise to assess. First many business people see fast-growing markets as a good area to explore, but Professor Mullins wants people to realise that the more important side of the equation is to ask whether customers will actually buy your product. Secondly if you’ve satisfied yourself on that question then you have to ask if you can build a sustainable competitive advantage in that industry – otherwise you might find a bigger player comes along and wins the day.

We feel sure that insights such as these will inspire and enthuse the next generation family members who attend the Convention 28-29 January 2011. It will be a great occasion for delegates to hear from a line-up of international speakers about entrepreneurship in all its forms - whether its starting a business, looking to set up a social enterprise, or just learning more about entrepreneurship.

You can hear more from Professor Mullins about these ideas on this video.

Innovation – why family firms lead the way

2010-10-11T12:39:00.002+01:00

http://www.ifb.org.uk/ The FBN International Summit in Chicago, where over 650 owners gathered this earlier this month, highlighted how innovation runs through the veins of the family business sector. With shortening business cycles, the advent of disruptive technology, globalisation and hyper competitive markets there is no room for companies to hide. Family enterprises have to embed into their organisations a culture that embraces change and promotes innovation –their survival and growth depends on it.

At the Summit global players such as Odebrecht from Brazil, FIAT of Italy, and North America’s Bechtel Group shared how their values and culture supported innovation. By embedding progressive employment practices that embrace change and continuous improvement these organisations have risen towards the top of their respective sectors.

In the case of smaller family firms focused on niche markets the same rings true. The owners generally set the lead, seeing their primary role as recruiting a team of highly motivated and skilled entrepreneurs and managers. Some of the best exemplars included Radio Flyer, a Chicago based third generation toy company who have won numerous awards for their achievements, creating a culture of innovation among their 110 employees. Revenues here have leapt four-fold since the current generation took over leadership. From Spain, Leche Pascual stands out for the transformation of their corporate culture since the third generation took the helm, embedding a systemic approach to innovation within the organisation. This has lead to 50% of their EUR 900M turnover being generated from new products that did not exist a generation ago.

The key learning’s on innovation from the FBN Chicago Summit include:

• Start with the company’s values; ensure they support innovation and change

• Ensure the board is committed to embedding a culture of innovation through choosing leaders who will help drive change

• Develop employee practices that reward entrepreneurship and innovation at all levels

Family business entrepreneurship is alive and well in the Midlands

2010-09-27T11:41:00.001+01:00

http://www.ifb.org.uk/ This year’s Midlands Family Business Awards, are helping put the spotlight on family business entrepreneurship, and the huge importance of British business families in the drive to grow the private sector as we rebuild our way out of the recession.

The awards, organised by third generation family business the Wilson Organisation, include a New Family Business category which I am judging alongside James Timpson (Timpsons) and Annabel Prow (Wilson Organisation). Meeting the shortlisted candidates for the award it was clear that we had a group of highly committed and passionate family business entrepreneurs. Each of the founders shared a strong sense of enthusiasm and the drive to succeed; above all everyone was passionate about serving their customers. Although making a profit is critical to secure the next stage of growth for the business, the path to success is through delivering excellent customer service. A common thread was the need to have clarity of vision and to stay focused, but also to have the flexibility to adapt to the customer’s needs.

Another common thread running through each business was the huge amount of personal effort and financial sacrifice made. The level of hard work that goes into getting early stage ventures going can put pressure on family life - sacrifices are made to ensure the new business gets the required effort. Some also cited the advantage of bringing family members into the business who can offer a wide range of skills; but it was equally important to be honest about individual strengths and weaknesses. Another factor that was cited as key was having excellent communications at all levels; something that becomes even more vital when the pressure is on. Communication will also be the subject at the IFB Regional Roundtable meetings this autumn in Yorkshire and the North-West.

The winner will be announced at a black tie evening reception at the family-owned Thrumpton Hall, just south of Nottingham on Thursday, 11 November.

Family ownership and the life cycle of firms

2010-09-20T11:14:00.002+01:00

http://www.ifb.org.uk/ Why are there significantly more large family-owned businesses, as a percentage of all companies in Continental Europe, compared to the UK? A study by Professor Julian Franks, of London Business School, has come up with some fascinating findings.

Professor Franks’ analysis of the top 1000 firms in France, Germany, Italy and the UK showed that 12% of large British firms are family owned compared with 40-45% in the major European economies. Analysing the life cycle of family firms from 1996-2006 showed that only 50% of firms in the UK that were in family ownership at the beginning of the period remained so a decade later, whereas in Germany the figure is 75%.

Image via WikipediaFranks explains that the cause of the UK exception is an ‘outsider’ system where the private benefits of family ownership are smaller, the opportunities for risk diversification are greater, raising equity is more expensive and the market for corporate control is more active. The study also observed that in the UK family ownership was likely to be concentrated in industries with less need for external capital.

The study implies that in the UK owners of large family businesses lean towards the shareholder value model, whereas on the Continent the family business stewardship remains more entrenched and is more favourably dealt with by the markets. The study concludes that family business does bring diversity to a modern economy, and providing owners generally are prevented from abusing their position for private benefit that we should promote a debate in the UK on how to encourage more owners of large family firms to retain control.

I believe that if we are to see lower attrition rates for large family firms we may need new approaches to policy, for example in relation to the protection of minority shareholders. But our culture may also be a significant factor and there needs to be more understanding of the real benefits of the family business stewardship model to the UK economy. This is the topic of new work being conducted at the IFB and a key theme of our national conference next year..watch this space.

A better path in business

2010-08-20T10:06:00.002+01:00

http://www.ifb.org.uk/

In his book “Good Value”, HSBC Chairman Stephen Green argues that the values of capitalism need reassessment and suggests that businesses should be focused on the pursuit of two distinctive but complementary goals: profitability and sustainability. Shareholder value maximisation in isolation is no longer an acceptable aim. Adam Smith the father of free markets, recognised early on the threat to the public of un-trammelled capitalism writing “the proposal of any new law or regulation that comes from (businessmen) ought to be listened to with great precaution...it comes from an order men who’s interest is never exactly the same with that of the public.” Smith is arguably suggesting that there should be checks and balances for an orderly functioning capitalist society to flourish.

Image via WikipediaGreen also accepts that regulation is necessary to ensure market driven excesses are avoided. He also argues that there has to be a return to more robust values and a “renewed morality” within the corporate world. Individuals are held accountable to the law, but should also be expected to take responsibility for their actions. Green argues that the same applies in companies: boards should take responsibility to ensure that corporate culture supports the pursuit of profitable and sustainable business.

Progressive family firms understand the need to balance their responsibilities to towards their multiple stakeholders, holding to a code of ethical behaviour, while ensuring the prosperity and growth of the enterprise. Responsible ownership of this nature is commonly referred to as “stewardship”.

The IFB has long held that the family business sector recognises the critical importance of stewardship. Looking ahead towards 2011 this issue is high on the association’s agenda and we will be debating during the coming year how family businesses can strengthen their organisations through successful stewardship.

The debate on family business branding

2010-07-12T15:07:00.001+01:00

http://www.ifb.org.uk/
Attending the 10th IFERA World Family Business Research conference at Lancaster University provided the chance to hear some leading edge thinkers on family business discuss how the sector is creating competitive advantage. One area of potential is the opportunity for family firms to take advantage of family business branding either at the corporate and/or product brand level.

Successful branding relies upon a combination of differentiation and demonstrating added value, and in this context family business provenance can lend good support. Research teams from Jönköping University, Sweden, and Ilinois State University agreed that there are opportunities when developing a firm’s branding strategy to highlight family firm credentials.

The researchers emphasised that the prime attributes for consumer choice will normally relate to good customer service, strong product features etc. It’s worth noting that family firms may have some inherent advantages in this area as the recent IFB/YouGov survey of the UK public showed that 62% already think that family firms often provide better customer service than other types of business.

According to the experts family business branding should therefore best be viewed as accompanying the overall effort to brand the company and its products. The result is that it helps strengthen the reputational capital of a firm - robust reputation capital is an asset that can allow a firm to extract a premium price for goods and services offered.

Successful examples range from huge corporations such as SC Johnson to small family firms such as Darlington and Daughters, both of whom helped illustrate the point that family business branding can lend credence either at the corporate (SC Johnson), or product brand level (Darlington’s). However IMD, who are also researching the subject through testing consumer’s knowledge about brand provenance, caution that the 50% accuracy score of family firms is low. They say this should make us think where and how to position family business corporate brands with the general public.

Values 'define success' says top business leader

2010-07-05T16:14:00.000+01:00

http://www.ifb.org.uk/
After a varied and highly successful business career IFB guest speaker, Javier Ferran, offered some valuable advice to a gathering of Next Generation members in June, on the importance of building and maintaining family values. Javier spent 20 years in the wine and spirits industry with family firm Martini and Rossi which was acquired by Bacardi Group, where he was President and CEO and is now at private equity firm Lion Capital.

He described the best-run family businesses as a ‘superior model’ because they gave the opportunity for long-term planning and the owners and employees could work in alignment. The complications for family firms tend to start in the transition from a single controlling shareholder to several owners when family emotions can get entangled with the business.

He believed that the most important thing a family business needs to do is define its values. The main role of the family should be to safeguard the values and lead by example. Family councils and advisors are only tools they are not solutions to family business issues. Javier observed: “It’s important to talk about these values all the time and to preach them. So that if someone in the business talks against the values it is immediately obvious and they will be embarrassed at what they have said.”

Trust - a source of competitive advantage

2010-06-09T18:31:00.006+01:00

http://www.ifb.org.uk/
This week’s IFB national conference has the theme Trust: A source of competitive advantage. Our view is that family businesses are uniquely placed to be at the forefront in the drive to revive trust in UK business.

Progressive family firms place great importance on a clear set of values, such as:

• Entrepreneurship - having a can do attitude

• Respect for People - fostering a strong workplace environment

• Social Responsibility - engaging with local communities

• and Sustainability - taking responsibility for the environment

Combine these values with a sense of stewardship, of being in business to succeed in the long-term and we have created a solid foundation for Trust. And this is of course Trust in the widest sense with all stakeholders; customers, employees, the supply chain, the public and indeed Government.

Knowing how family firms are perceived by the British public is important so the IFB commissioned a YouGov survey– over two thirds of the public recognise the important role family businesses play in economic growth and employment (68%) and almost two-thirds believe family businesses provide better customer service than other types of business (62%) – a key measure of trust in a business.

Sector firms of course, have to deliver strong business performance, but there is a growing and understandable pressure from society to broaden the measurement of success, beyond profits alone.

The benefits of a high trust organisation are immense: highly trusted companies can maintain strong levels of employee morale reducing staff turnover, absenteeism and associated costs. Their brands can achieve high trust status with the consumer. Mars and Beaverbrook the Jewellers are two family firms speaking at the IFB conference on how they are achieving strong trust.

But family firms have their challenges, such as;

• Improving decision-making, both at the owner and the business level through more robust governance

• Ensuring that the transition of ownership between generations is planned and doesn’t disrupt the business

• Making sure there is no glass ceiling for employment opportunities for non-family employees and being open to ideas and innovation

What we see is that the best family firms are embracing these challenges while building and sustaining high trust organisations.

Social enterprise - building the Big Society

2010-06-01T19:00:00.001+01:00

http://www.ifb.org.uk/
I witnessed social entrepreneurship in action last week when the IFB participated in a Business in the Community event visiting charities and social enterprises in London’s East End. The event showed how business can bring benefit to their own organisations, as well as wider society, by getting involved in these activities.

Social entrepreneurs are people who use their entrepreneurial can-do approach and creative mind to set up organisations that deliver social or environmental benefits and help change lives and society for the better. And among the enterprises I saw in the Seeing is Believing programme was Shepresa that offers support to Albanian’s who have fled violence or persecution to seek asylum in our country. There was also Bikeworks, in Tower Hamlets, which provides a range of cycling related services, including vocational training for people from homeless and other challenging backgrounds.

The leaders of the organisations are alumni of the School for Social Entrepreneurs (SSE) in Bethnall Green, an organisation at the forefront of this sector in terms of education. We saw first-hand how businesses can engage in the work that SSE does developing leadership and other business skills in budding social entrepreneurs.

This is all about putting, what David Cameron called, the Big Society into action - the Government has made a specific commitment to encourage social enterprises. There is a huge role for business to play, working with social enterprise to bring benefits back to our organisations through greater employee satisfaction and learning as well as strengthening social capital generally.

Family businesses can get involved in supporting social enterprise in a number of ways including investing in it and including it in the firm’s supply chain. There are also ways of involving employees, including offering opportunities for secondments, or providing mentoring to social entrepreneurs, as well as pro bono advice and expertise.

The virtues of long-term business planning

2010-05-10T16:20:00.005+01:00

http://www.ifb.org.uk/
French author and entrepreneur Jean-Louis Servan-Schreiber writes in a new book Trop Vite! (Too Fast, Albin Michel, 2010) that our world has become too short-term. Horizons have shrunk in every aspect of society whether it’s politics, consumer behaviour, or in business as the pace we live at has accelerated. The consequence is that the long-term is pushed into the shadows - we live for today.

Twenty years ago Michael T. Jacobs predicted the shift to short termism in business when he wrote in Short-Term America that the US would not be able to retain leadership if it continued to focus on quarterly results. Since the economic crisis, siren voices around the world have started to denounce short-termism and its negative consequences. Fresh research from the Hudson Center for High Performance concluded that short term business measures taken to meet performance targets fail to produce lasting results.

Servan-Schreiber, also noting the negative impact that the short term pursuit of shareholder value can have on companies sets out some principles for rebuilding a longer-term focus. He advocates progressive human relations policies that reflect the company’s values and provide genuine development opportunities for employees. A commitment to training employees helps them develop their talent, leads to higher levels of motivation and a greater sense of purpose.

Family-owned businesses are often regarded as being able to take the long view and are keenly aware of the importance of handing their firm on to the next generation in a healthy state. They often consider all their stakeholders, not just a selected few, and make employee motivation a priority. Now we are beginning to see non-family firms following this lead, with the best balancing the short term imperatives of performance and survival, with a focus on a long-term vision, and a genuine sense of stewardship that takes into consideration the interest of all stakeholders.

Election Puts the Spotlight on Social Capital

2010-04-22T14:59:00.003+01:00

http://ifb.org.uk/
As the UK general election nears, politicians have been seen at leading family firms for eye-catching picture opportunities, but their visits are not down to chance. During campaigning David Cameron made speeches at Fuller’s Brewery, in London, and Warburtons the breadmaker, in Bolton, while David Miliband tucked into a pork pie at MI Dickson, on Tyneside. No doubt both parties hoped for a positive response from the public by associating with these long-established UK businesses. These firms, all members of the Institute for Family Business, also share some other enviable qualities in the politician’s eyes as they are:

• Successful: their brands are highly regarded by consumers in their respective markets

• Good places to work: their success is driven by motivated and empowered work forces

• Caring about the community: each organisation cares about their local communities

These visits have put the spotlight on the importance of social capital in today’s business world. Successful family businesses have strong financial and other assets, but also at their best have solid foundations based on a strong set of corporate values.

In summary, they are beacons for UK plc and living evidence that family firms can lead the way, through long-term stewardship and stability, to deliver a valuable contribution to the nation’s wealth.

Building greater trust in our businesses and ensuring that social capital is valued strongly alongside financial and other capital will help secure a more sustainable economy, counterbalancing the element of shorter term capitalism that exists in a free market economy such as ours. Family firms add diversity to our economy and have a big role to play in securing our prosperity.

Family values and shareholder value

2010-04-12T17:44:00.003+01:00

http://www.ifb.org.uk/
There is an even greater sense of anticipation now for the speech of CBI director-general Richard Lambert at the Institute for Family Business National Conference, in June, following the publicity surrounding his recent speech at the Royal Society of Arts. In comments that made the lead story in the Financial Times he explained how the relentless pursuit of shareholder value has helped to undermine the reputation of business. Richard will be tackling this question head on at our conference and will explore how family firms can develop trust as a source of competitive advantage.

His thesis, put forward at the RSA, is that the irresistible drive to reduce costs at any price has fractured the relationship between companies and their employees and local communities. An open capital market for control generating pressure in the form of hostile takeovers has further fuelled the trend. Another driver is excessive levels of high octane debt piled onto balance sheets. Crowning it all in the public’s eye is the widening pay disparity between top earners and the shop floor which has created a gulf between the haves and the have-nots in society.

Are family businesses any different? Does long-term stewardship which characterises the approach of much of the family business sector make for more moderate outcomes where employees have greater satisfaction at work and communities are not left abandoned? The answer is that at their best family firms can achieve this, but it’s not automatically the case. Every firm faces the relentless pressure of globalisation; family-owned factories have been shut and production has been moved offshore. But family business owners often have strong values which they wear on their sleeves and these set the tone for corporate behaviour.

To be the employer of choice in a town, or region, the best family firms create high trust organisations where individuals come to work feeling valued. They invest above and beyond the strict minimum that shareholder value principles would dictate because they want to be best in the business. Profit maximisation is not their sole mantra. Owners balance the requirements of the company for reinvestment with their expectations for liquidity. While the sector does face many challenges family firms can be role models by valuing stewardship above shareholder value.

Learning from Swedish enterprise

2010-03-29T17:26:00.002+01:00

http://www.ifb.org.uk/
Some thoughts after returning from a fascinating conference, in Stockholm, which looked at how economic growth can be encouraged by improving transfers of ownership and through entrepreneurship. At a plenary session, attended by the Swedish State Secretary for Enterprise, Jöran Hägglund, I spoke on behalf of the IFB and it was good to hear about his government’s commitment to taxation and other legislation that supports the transfer of business ownership - unfettered by taxes that damage business prospects. It will be useful to cite this Swedish example in the IFB’s ongoing representation work to ensure that Westminster policymakers address the needs of UK family businesses. One alarming statistic that I quoted, was that approximately 100,000 businesses in Britain a year could be affected by business transfer failure.

The overwhelming message from the conference was that prosperity and employment can only truly be spurred on by embedding a national culture of entrepreneurship. From China to India the emerging economies have embraced this approach throwing down the gauntlet to the west. The conference heard how Europe has an uneven record in embracing free market capitalism, but it was encouraging to see how much attitudes had changed in Sweden, where entrepreneurs making money were increasingly seen as positive role models.

Family business dominates the privately owned SME sector in Europe, and holds an important place as far as larger firms are concerned. It is therefore right to demand that our sector plays a key role in driving entrepreneurship and innovation, to rebuild our economic strength. But with 1 in 4 owners of companies in Europe approaching retirement age, a new wave of owner-managers with entrepreneurial instincts must be encouraged to take over the reins. The best of this new generation of wealth creators combine passion, skill and determination; where they take over an existing organisation they challenge the status quo while retaining the best of the values from the outgoing owners. These entrepreneurs have a lot at stake, resulting in strong commitment – it is often a matter of survival. Certainly the senior generation, if they have not already done so, should be discussing options for succession and the future ownership of their business as a matter of urgency.

Ingenious Britain

2010-03-19T09:57:00.006Z

http://www.ifb.org.uk/
Sir James Dyson’s Ingenious Britain report has given a boost to the debate about the importance of entrepreneurship in rebuilding our nation’s economic strength. It focuses the spotlight away from UK plc and onto the vital role that new business activity and spin-offs have in boosting technological innovation, design and employment.

There is also a broader national debate taking place about what can be done to encourage entrepreneurship in our society, in the widest sense of the word. A new group, Enterprise UK, has been formed, founded by IoD, CBI, FSB and BCC, to collect practical suggestions that any Government could use to promote and support entrepreneurship - the ideas could also be used by businesses, universities, schools and individuals. The Institute for Family Business (IFB) will be sharing its views on this important subject with Enterprise UK.

Entrepreneurship is one of the key driving forces of the family business sector. Indeed business families are prime breeding ground for tomorrow’s entrepreneurs. The Global Entrepreneurship Monitor (GEM) examined a few years ago the background of entrepreneurs starting new business activities, and concluded that family firms are an important source of young entrepreneurs. With 3 million family firms in the UK we have in the heart of our economy a latent talent pool of family business entrepreneurs.

What can we do to unleash the entrepreneurial spirit of our nation’s business families? Sir James Dyson cites education, skills and deregulation as critical success factors. The IFB agrees with this list, but also believes that values are at the heart of the creating foundations for successful entrepreneurship. Determination, courage and hard work are values that parents can instil into the next generation. By fostering these values the nation’s business families are playing a vital role in creating tomorrow’s enterprising Britain.
http://realbusiness.co.uk/leadership/dyson_no_magic_bullets

Family businesses holding their own

2010-03-09T13:34:00.010Z

http://www.ifb.org.uk/
At a recent London School of Economics meeting, which I chaired, a member of one of Europe’s leading family businesses saw a positive outlook for the sector. In a debate with students on whether family businesses can hold their own in today’s economy Dr H.C. August Oetker, Chairman of the Supervisory Board of Oetker KG, the Germany-based diversified family company, rejected as outdated the stereotype images of a sector plagued by nepotism, lack of scale and inflexibility.

Dr Oetker argued that the modern family business is often engaged in a David against Goliath battle and has three main advantages:

• Stability - a conservative policy in terms of financing the business, eschewing excessive risk and debt investing the family’s own capital

• Security - more predictability in terms of strategic approach; often generating greater employee trust and loyalty

• Long-termism - where the payback horizon on investments may often be measured in decades not years

But there are risks such as the resistance to change, particularly in making decisions on employment issues that impact the workforce. Family business boards have to address the dilemma of balancing an instinct towards social responsibility while driving business performance.

The Oetker formula - With revenues of more than 9.2 billion euros, the group’s formula for success is driven by a high degree of reinvestment, paying shareholders a modest dividend each year. Risks have been balanced through a process of diversification and key divisions include the Hamburg Süd shipping group, Dr. Oetker branded food products and a focus on alcoholic beverages.

http://www.ifb.org.uk/