Determining The Scottish Family Business Agenda
19th October 2016 Paul Andrews
Latest research shows time is truly of the essence for Scottish family firms according to FBU Scotland, the unparalleled rallying point and voice of Scottish family businesses
The FBU Scotland ('FBUS') 2016 Family Business Survey has identified the key challenges facing family businesses, clearly identifying the things that are keeping family business owners awake at night and that need to be addressed.
Unsurprisingly, the current trading environment is the greatest cause for concern as business owners across Scotland come to terms with the economic climate, regulation and legislation and political uncertainty – both domestically in terms of the Scottish agenda, as well as the implications of Brexit, even more so with the announcement from Westminster of the intention to invoke Article 50 early next year.
Further significant concerns for the Scottish family business community revolve around balancing the needs of the family and the business, continuing to build and maintain a profitable business and issues around staff and future leaders.
The Ten Biggest Concerns For Family Business Owners:
- The economic climate 70%
- Regulation, legislation and red tape 65%
- Balancing the needs of the family and the business 56%
- Political uncertainty 52%
- Profitability 46%
- Recruiting, retaining and motivating staff 43%
- Succession planning 35%
- Building the value of the business 33%
- Sustainability 33%
- Identifying and developing future leaders 32%
As Tom Craig, Chairman of the FBU Scotland Advisory Board explains, “It is not surprising that prevailing uncertainty surrounding the future of Britain in Europe is on the minds of business owners, nor the need to maintain sustainable and profitable businesses going forward. It would be odd if these were not on the current family business agenda.”
“Despite the uncertainties, family business owners will continue to take the approach that they have for generations, to create businesses for the long term, invest sensibly to create sustainable firms and continue to focus on preserving the business, in many cases, for generations to come.”
Paul Andrews, Founder and Managing Director of FBU Scotland added, “Family firms are renowned as good employers and in many cases employ generations of the same family in the business, and are recognised for the benefits that they provide too. However, there is often difficulty in recruiting at a senior level where there may be a perception of lack of long term opportunities outside of family members but with more family firms employing non-family CEO’s such as Mactaggart and Mickel and Anderson Maguire, there are ways that this can be overcome, and future leaders can be identified from outside the family.”
Balancing the needs of the family with those of the business are also key to the success of the family firm and as the business moves through the generations, and the family is also likely to have grown, steps need to be taken to manage the expectations of the shareholders and the extent to which additional pressure can be put on the business to perform. The future leadership of the business also needs to be addressed, and with only 30% definitely wanting the next generation to be involved, there is clearly potential for some uncertainty in this regard.
As Paul adds, “Family firms are the backbone of the Scottish economy and as such take a long term view and often invest cautiously for the future, make a significant contribution in terms of employment, income and tax revenues and plan for the next generation too. It is good to see a realistic stance on the challenges of running a family business in Scotland today through the results of the survey.”
The Ten Least Significant Issues For Family Business Owners:
- Improving shareholder communications 5%
- Dividend and remuneration planning 9%
- Developing an international presence 12%
- Bringing in external investors 14%
- Developing effective governance 16%
- Sibling rivalry 17%
- Creating a legacy 19%
- Preserving wealth 19%
- Extracting value from the business 19%
- Identifying and maintaining family values 20%
In the most part, family firms across Scotland are family owned and run with 91% having a family member as CEO or Managing Director but this is not always the case. In fact, 47% have non-family board directors, 31% have non-family shareholders and 79% employ non-family senior managers. Non-family senior management could also play a significant role in the business going forward as 28% of family firms expect to have a new leader at the helm in the next five years.
Scottish family firms are also proud of their roots and their heritage with 73% actively promoting the fact that they are a family owned business and 50% include the family name in the name of their business. Tom continues, “There has been increasing recognition of the family business model in recent years and as more and more larger family firms put their heritage and roots in the public domain, such as the likes of Walkers Shortbread, Warburtons and SC Johnson, some of the negativity surrounding the sector that was present a few years ago has now been eroded. Family firms are proud of who they are and with the oldest family firm in Scotland, John White & Sons dating back to 1715, there is a lot of history to be proud of.”
Nevertheless, family firms think there is some way to go in term of recognition with only 3% believing they get the recognition they deserve from the government, 18% from the media and 50% from the general business community. 61% of respondents also felt that when the family name is in the business name there is more pressure on the family and the need to protect the family reputation too.
Paul concludes, “Social media is a great tool for family firms to get their message across and to share the journey of each family and family business and as such helps to build more awareness of the sector and the diversity of the businesses that are family owned. Scotland is awash with great family firms and it is not until these household names are listed that people realise that these businesses are family owned, the likes of Tunnocks, Baxters, Arnold Clark, Macsween, Kinloch Anderson and Crieff Hydro to name a few.”
It is great to gain an understanding of the challenges facing family firms in Scotland and to highlight these challenges during Scottish Family Business Week 2016. The results of the survey will also be useful in determining the agenda and learning programme of events organised by FBU Scotland for the sector going forward too.
This was the inaugural survey of the sector by FBU Scotland covering family firms the length and breadth of Scotland, sizes from less than £1 million to over £100 million turnover, less than 10 employees to over 250 and representing all sectors of the economy too. In terms of generational involvement the range was from first to tenth generation.
To find out more about FBU Scotland, please visit www.fbuscotland.com