In 2020, Alex Scott, stepped-down from his role as Chairman and CEO of Applerigg, a private, family-owned business built on the foundations of a financial services group established by his great-grandfather in 1903. A fourth-generation leader of the Scott family’s business, he has been both a successor and managed his own succession.
As a result, he has a deep personal understanding of the responsibilities and challenges of managing generational transition, as well as the opportunities. Alex spoke to Paul Pratt of PKF to share his thoughts.
According to Alex, succession is a vital part of a family business’s success, particularly because there’s a predilection among businesses not to endure multiple generations. That’s not necessarily because of succession issues, he stresses, it might be that the market the company operates in just isn’t conducive to long-lasting businesses. However, you can’t go through the generations if you don’t get that critical element right.
An essential part of getting it right is nailing the timing. How do you know when it’s time to go?
“In my own case,” says Alex, “it was when I knew I had a successor who was ready, and that coincided with where I was in my life cycle. I’m 62 and although I had no desire to stop working, I was conscious that I’m not immortal! I was also aware that the last great test for leaders of a family business is to ensure a good succession."
“If you’ve got a good successor then, in my mind, you do everything you can to facilitate that process. I don’t think that you necessarily get to choose your own time,” he explains.
“To me, the long-term success of the family and the family business entity is more to do with the timing of the successor rather than the succeeded, so I was very happy to flex around what I thought was the optimum solution for my successor.”
“I suspect that some people have been asked to succeed in a situation when either they weren’t ready, or after their enthusiasm has waned,” he adds. “I don’t think you can say ‘I’m 65 and you’re 45, so today’s the day!’ I think it’s a much more fluid situation than that but getting the timing right is key.”
What happens if the successor is ready ten years before the leader is willing to relinquish the reins?
“My decision would be based on what the business was doing at the time. For example, if we were in the middle of a project that needed to complete. It would depend on my own demeanour, but also on where exactly the business was,” says Alex.
“People are capable – I was asked to succeed in my early 30s. If a great successor is available, then it provides a really interesting dilemma for the leader who’s in place if they don’t feel ready to go. But it’s a quality problem,” he adds, “because you’ve got, hopefully, two great leaders! Can they cohabit? Probably not. You need to give your successor time and space to develop and to, frankly, get out of the way.”
Avoid the void – what do leaders step-off into?
“I’ve made it my ‘hobby’ over the last decade to look at people of my age and older, to see how they handle stepping-off,” recounts Alex.
“My take is that the better the hinterland that the individual has developed, the more choices they have about succession and being succeeded."
"The wider the breadth of their interests, be they for profit or not for profit, the more fun they can have. Family business is not a job it’s a vocation,” he exclaims.
“You’ll probably carry on in business, you won’t just stop. I think it’s partly the job of the individual being succeeded to make sure they’ve got options that mean they can step-off, but not many do in my limited experience.”
Alex remains a Trustee of Grosvenor and chairs the Grosvenor Pension Plan and Grosvenor Food & AgTech. He is a Director of the Family Business Network International, co-founded and is Joint Life President of the Institute for Family Business (UK) and is a Director of the International Federation of Family Offices. He is also a Trustee of the Francis C Scott Charitable Trust and the Cumbria Community Foundation.
“As the business leader, your brain has been multifaceted, dealing with multiple issues and challenges."
"To keep yourself interested, stimulated, engaged, and intellectually agile, you’ve got to replicate some of the challenges that you had when you were solely focussed on one business."
"Just playing a sport, for example, isn’t sufficient of a hinterland to keep a busy businessperson really interested,” he believes. “Your brain isn’t ready for that!”
Alex recognises that it’s different for a creator compared to a successor.
“If you’ve created the company, then I think it’s really hard to build a hinterland because it will have taken all your time and effort and one hundred percent concentration, to create something unusual and extraordinary in the classic sense of the word. Most of your social interactions and leisure will have been linked into the business – it becomes all consuming."
"My own path has been a bit of a rounder walk,” he says. “The successor and subsequent generations, will probably have had a different up-bringing and education, travelled and had time to contextualise what they’re inheriting, which allows them to develop a broader approach to life,” Alex explains.