Thursday, 22 April 2010

Election Puts the Spotlight on Social Capital

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.

Monday, 12 April 2010

Family values and shareholder value

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.