It is difficult to overstate how important family businesses are. Some two-thirds of UK businesses are family-owned – 4.7 million in total. They employ more than 12 million people, approaching half of all people employed in the private sector. They generate more than a quarter of UK GDP and in 2015 alone the family business sector paid more than £133 billion in tax.
In Somerset many of the county’s biggest, most historic and most successful firms are family businesses. Perhaps the most famous and significant of all Somerset family businesses made headlines earlier this week. Clarks Shoes announced it would be bringing some manufacturing back to its home village of Street, more than a decade after it decided to focus manufacturing in the Far East.
The firm was founded in 1825 and over nearly 200 years of trading it has thrived and been successfully handed down to the next generation. But that hasn’t happened by accident – and of course it hasn’t all been plain sailing.
Careful planning, innovation, responding to market trends, diversification and implementing tough decisions are among the reasons it has been able to succeed and provide generations of employment to people in Somerset. It is extremely rare for a family business to have the lasting success of Clarks.
Particular dangers to the future prosperity of family businesses included bottom-up leadership, where founders who have expertise in the day-to-day operation of the business lose sight of strategic matters. Other is the risk of ‘all aboard leadership’ where a family business can be tempted to create roles, perhaps for children, that there aren’t necessarily a critical need for. Other potential leadership issues that can be a bigger problem for family businesses than other firms is the danger of ‘vaguely agreeing’.
The dynamics of families mean that there is an additional risk of conflict that other businesses don’t face and in a bid to avoid conflict some businesses are tempted to set vague goals that nobody will disagree with. This can be counter-productive and often family businesses need to have difficult conversations that may determine success.
Family businesses are particularly prone to being run by a ‘super leader’ who struggles to know when to let go – either of the business as a whole or particular areas of leadership. As family-owned businesses grow and become more successful, they often need to think about bringing in senior people from outside the family, to help add to the skills and experience base and take the business to a new level.
Bringing in someone from outside the family to help run the business has pitfalls for all concerned, and can be expensive if it goes wrong – but careful planning and preparation should help mean that the relationship works.
Source: Thatcher, Holly, July 13, 2017, http://www.somersetlive.co.uk/news/business/leadership-vital-ensure-family-businesses-198436