Family-owned businesses are the backbone of many economies, driving innovation and long-term growth. Yet, as these firms grow, the complexities of governance, management, and succession planning often require the expertise of professionals outside the family. Recruiting non-family directors and executives can be a strategic move for family businesses, ensuring that the enterprise remains competitive, sustainable, and adaptable. However, this decision brings its own set of challenges and opportunities. Why Consider Non-Family Executives? Professional Expertise Non-family executives bring valuable skills and experience that complement the strengths of the family leadership. Often, family members may lack the specialized knowledge required to navigate certain stages of business growth, such as international expansion, digital transformation, or regulatory complexities. By hiring professionals with specific expertise, family firms can enhance operational efficiency, strategic direction, and innovation. Objectivity and Fresh Perspectives Family firms can sometimes be insular, with decision-making influenced by long-standing family dynamics and emotions. Non-family directors and executives offer a level of objectivity that can be difficult for family members to maintain. Their independence can help challenge entrenched thinking and introduce new ideas that drive the business forward. This outside perspective can be crucial in avoiding groupthink and making tough, data-driven decisions. Succession Planning and Continuity One of the biggest challenges for family firms is managing succession. Family members may not always be interested in, or prepared for, leadership roles. Bringing in non-family leaders can ensure that the business has strong management in place even when there is a gap in family leadership. These executives can serve as stewards of the business during transitional periods, helping to train and mentor the next generation of family leaders. Investor Confidence For family businesses looking to attract external investors or partners, having non-family executives on board can signal stability and professionalism. Investors often appreciate the presence of independent leadership, as it demonstrates a commitment to sound governance and mitigates risks associated with family conflicts or nepotism. This can also lead to better relationships with banks, customers, and suppliers, who may view the business as being more transparent and well-managed. Challenges of Recruiting Non-Family Leaders Despite the advantages, bringing in non-family directors and executives is not without challenges. Family businesses must carefully manage the integration of non-family professionals into the company culture. Cultural Fit Family firms often have unique cultures built around shared values, traditions, and a long-term vision. It can be challenging for non-family executives to navigate these dynamics, especially if the culture is tightly controlled by the family. Ensuring a good cultural fit is crucial to the success of any non-family hire. It’s important to find individuals who respect the company’s history and values, while still bringing in fresh perspectives. Balancing Family Interests and Business Needs In many family businesses, the interests of the family and the business are closely intertwined. Non-family executives may face difficulties in balancing these sometimes conflicting priorities. For example, decisions that are in the best interest of the business, such as reducing dividends or restructuring the organization, may not align with family members' personal goals. It’s essential to establish clear governance structures that outline the roles and responsibilities of both family and non-family executives to avoid potential conflicts. Resistance to Change Family firms can be resistant to change, especially if the company has been run by the family for generations. Introducing non-family executives may be seen as a challenge to the family’s authority or a threat to tradition. Overcoming this resistance requires open communication, trust-building, and demonstrating the value that external professionals bring to the table. Having a clear vision for why non-family leaders are being brought in—and how they will complement, not replace, the family’s role—can ease this transition. Compensation and Retention Attracting top-tier non-family executives often requires competitive compensation packages, which may differ from the traditional salary structures in family firms. Family businesses must be willing to offer market-rate compensation, including performance incentives, bonuses, and equity options, to retain high-calibre professionals. However, this must be balanced with internal equity and the expectations of family members, who may not always understand the need for higher compensation for non-family leaders. Best Practices for Recruiting Non-Family Directors and Executives Define Clear Roles and Responsibilities Before bringing in non-family executives, it’s critical to define clear roles and responsibilities, both for family members and non-family leaders. This includes establishing clear reporting structures, decision-making processes, and governance frameworks. A well-defined structure helps avoid confusion and ensures that everyone is aligned toward the same goals. Conduct a Thorough Search Process Recruiting non-family executives requires a rigorous search process. Family firms should consider using professional executive search firms that specialize in family business dynamics. These firms can help identify candidates who not only have the necessary skills and experience but also understand the unique challenges of working in a family business. Onboarding and Integration The onboarding process is crucial for the success of non-family executives. This involves not only familiarizing them with the business but also helping them understand the family’s values, history, and culture. A mentorship program, where family members work closely with non-family executives, can help foster relationships and ensure smooth integration. Establish Open Communication Open and transparent communication is essential in family businesses. Regular family meetings, where non-family executives can participate, are important for ensuring alignment between the family’s vision and the business’s strategic direction. Additionally, non-family executives should feel comfortable providing feedback and raising concerns without fear of reprisal. Embrace Governance Structures Many successful family businesses establish formal governance structures, such as a family council or advisory board, to provide a platform for both family and non-family members to discuss business matters. Independent directors can also play a key role on the board, providing guidance and oversight that balances family interests with the long-term success of the business. Recruiting non-family directors and executives is a crucial step for family-owned businesses looking to scale, professionalise, and secure their future. While the decision comes with its own set of challenges, the benefits of bringing in external expertise far outweigh the risks. By embracing professionalism, fostering open communication, and maintaining a clear vision, family firms can create a leadership team that not only preserves the family legacy but also drives the business toward sustained success and growth.

Retailers reported marginal growth in sales volumes in the year to September, following a three-month-long downturn. That’s according to the latest CBI Distributive Trades Survey. Firms in the retail sector anticipate annual sales to continue growing next month, at a broadly similar pace. Key Findings: Retail sales volumes grew marginally in the year to September, following a three-month-long downturn (weighted balance of +4% from -27% in August). Retailers expect sales to grow in October at a broadly similar pace (+5%). Internet sales volumes bounced back in the year to September at the fastest rate since June 2023 (+18% from -15% in August). Online sales are expected to grow at an even quicker pace in October (+35%). Nonetheless, retailers reported disappointing sales for the time of year (-11% from -21% in August). Sales are expected to remain similarly weak by seasonal standards next month (-10%). Retail orders placed upon suppliers declined at a moderate rate in the year to September, following a rapid fall last month (-14% from -42% in August). Retailers expect to cut back on orders at a slightly slower pace next month (-10%). The total distribution sector (includes retail, wholesale, and motor trades) recorded a mild contraction in year-on-year sales volumes this month (-8% from -20% in August), with a similar decline expected in October (-7%). Martin Sartorius, Principal Economist, CBI, said: "After a challenging summer, retailers will welcome the modest growth in annual sales volumes this month. While some firms within the retail sector are beginning to see tailwinds from rising household incomes, others report that consumer spending habits are still being affected by the increase in prices over the last few years." "In contrast to the recovery seen in the retail sector, wholesalers and motor traders continue to see a decline in sales volumes, with businesses reporting concerns about a slow and uncertain market." "Retailers, alongside a host of other important sectors, are keen to see the government take long overdue action to address an antiquated business rates system that has become too complex, too unpredictable and is, ultimately, unfair on many firms." In addition, data from the survey showed: Retailers reported that stock volumes were “too high” in relation to expected demand in the year to September (+19% from +14% in August). Stock positions are set to remain similarly elevated next month (+20%). Wholesale sales volumes in the year to September fell at a similarly modest pace to last month (-8% from -7% in August) and are expected to decline at a broadly unchanged rate in October (-6%). Motor trades sales volumes reported a fast decline in annual sales, though at a somewhat slower pace compared to the sharp drop in August (-43% from -57% in August). Sales are expected to fall at a broadly similar rate next month (-42%).

Western Pension Solutions (WPS), the specialist pensions adviser to family firms with defined benefit schemes, today announced the appointment of a new Director, Greg Morris, to lead the Midlands region. Greg has over 25 years of consulting experience at Deloitte, and most recently with Isio. He brings a deep understanding of the unique challenges and opportunities faced by family businesses when designing and implementing strategy for their pension schemes. Greg Morris, newly appointed Director of Western Pension Solutions, commented: “I am delighted to be joining WPS at such an interesting time in the pensions industry. The sudden improvement in funding levels for many schemes has seen an increased appetite for de-risking through insurer risk transfers." "Other family firms are taking the opportunity to explore alternative options that may align more closely with their purpose, values and priorities as business owners. I’m excited at the prospect of talking to families and helping them to choose their path.” Ben Fowler, Founder and Managing Director of Western Pension Solutions, commented: “I am thrilled that Greg will be leading our business in the Midlands." "After establishing WPS in London and the North of England, it has always been our ambition to have a presence in a region that boasts so many outstanding family businesses." "We have searched patiently over the years for someone who shares our values and has the right blend of experience, passion and expertise. We’ve found that in Greg.”

The latest KPMG survey of 50 ESG specialists in 10 countries and territories reveals sustainability increasingly embedded in wider corporate strategies. Key Findings: Despite increasing maturity and focus on purpose-driven approaches, companies are having to adapt and flex to increasing ESG reporting requirements and an evolving regulatory landscape, and this has effects on their governance and organization Findings highlight that company structures have adapted to ESG, from the board level to the whole organization. The findings also suggest a growing need for group sustainability units to adapt to ESG’s increasing importance by taking a more strategic approach, working with other departments, and no longer trying to do everything connected with sustainability themselves. ESG and broader sustainability strategy have made their way to the top of board agendas in 2024, despite business leaders facing a bulging inbox of issues and challenges, according to new research from KPMG International. Chief Sustainability Officers from some of the world’s largest companies were interviewed for KPMG’s global survey on ESG governance and organization, to gain a deeper understanding of how companies are structuring their set-up and teams for sustainability and responding to a wave of new regulation and increased stakeholder and investor pressure for transparency on ESG. Almost all respondents reported high ambitions for ESG in their organizations, with half now viewing sustainability as a strategic issue that is embedded in core business operations. With ESG covering a wide area of societal and governance issues, the challenge for many businesses can be deciding what to prioritize. For many respondents, decarbonization and the race to net zero was the topic most-often included in their corporate ESG strategy, with diversity, equality and inclusion and human rights in the value chain the next most-mentioned theme. Nadine-Lan Hönighaus, Global ESG Governance Lead, KPMG International explains that "Sustainability is growing in strategic importance for companies, with increasing reporting requirements on environmental, social and governance (ESG) as well as other demands on the organization regarding sustainability. This creates challenges for the group sustainability units within organizations charged with ESG work. On one hand, such units must produce more material than they did 10 years ago while strategically developing and implementing work on a wide range of topics from climate to human rights." "On the other hand, the framework conditions for this work have become much more complex and the standards for implementation, reporting, mandatory auditing and governance requirements increasingly require a robust approach. KPMG’s research highlights that companies should (RC) start developing a clear analysis of the characteristics, strengths and weaknesses of their existing sustainability-focused organization and how effectively it supports their (A) ESG strategy, performance and reporting." Who leads on ESG? With ESG recognized by boards as a key issue, there is evidence of companies finding their feet on who makes the decisions on future strategy and the structures needed to measure, implement, and report effectively. About one-quarter of the organizations covered by KPMG’s research said they have a board level sustainability committee. A further fifth discuss it through committees that cover other topics, most commonly the audit committee. There was also evidence that ESG is a topic making its way into committees typically focused on management, innovation, remuneration and safety and culture. The question now facing many business leaders is who should make the ultimate decision on ESG as it increasingly becomes embedded in the fabric and purpose of a company. The chief executive officer is responsible for sustainability in almost half of organizations surveyed, with a dedicated chief sustainability officer as the second most-popular option. The remaining respondents revealed a wide variety of roles taking charge of ESG – from head of supply chain and manufacturing to the chief risk officer. Responding to rising regulation with better resources and a focus on remuneration Reporting on ESG has generally been a voluntary exercise, but some jurisdictions are in the process of making it compulsory, most significantly the European Union through its Corporate Sustainability Reporting Directive (CSRD). Nearly half of the organizations in this research plan to report in accordance with CSRD for their 2024 financial year, with nearly a fifth more planning to do so a year later. Nearly three-quarters of organizations in this research have six or fewer full time equivalent staff working on non-financial reporting, and more than half have three or fewer. Just over half said they expect to see an increase in this number, with most of the rest expecting numbers to stay about the same. Group sustainability units take sole responsibility for ESG reporting at more than half of the organizations in this research. It is shared between several department at a further quarter with written responses suggesting that most involve both sustainability and finance with some also including communications. Most of the rest make finance and accounting solely responsible, except for one where a communications and government affairs department runs reporting with an ESG unit in the finance group responsible for data quality. Just under half of the organizations in this research have ESG topics in their core corporate key performance indicators (KPIs), with more than a quarter more including them in management level performance reviews. Some respondents say that their organizations plan to increase such work, with one mentioning that they currently have a single indicator on carbon dioxide emissions intensity but plan to add more. Almost half of organizations interviewed produce internal indicators on a quarterly basis and several use monthly reporting for some measures. Annual is the most common frequency for external reporting used by more than three-quarters of organizations, with the remaining respondents doing so quarterly. ESG key performance indicators are used in calculating executive pay in a majority of the organizations in this research, with just over half using these for short-term incentives and two-fifths for long-term incentives. Just under half have between 16 and 25 percent of variable executive pay linked to ESG indicators. Looking to the future of ESG Sustainability professionals see their task becoming more and more a part of everyone’s job in the future. Some see the central function becoming smaller as individual business units take up work, while others believe that finance is likely to take over reporting on sustainability given its increasing importance. The result of these two trends is that group sustainability units need to become more strategic in outlook so they can provide oversight and guidance across the business and to the board. John McCalla-Leacy, Global Head of ESG adds; "Businesses have the opportunity to embed robust ESG and suitability governance by ensuring effective connectivity between functions - from finance to internal operations and supply chains - which can both help to (RC) enable compliance with reporting requirements and the identification of sustainable value creation opportunities through enhanced operational transparency and data driven insights." "As one respondent put it in this survey- ‘if we want to exist as a company in 10 or 20 years from now, we need to transform." The full report can be accessed here

Global engineering steel specialist, William Hare Group, is celebrating after seven of its projects were recognised at prestigious construction industry awards. The successes included three awards and a commendation at the Structural Steel Design Awards 2024, and a further three wins at the Council on Tall Buildings and Urban Habitat (CTBUH) Awards 2024. Jointly sponsored by the British Constructional Steel Association and Steel for Life, the Structural Steel Design Awards saw prizes go to 8 Bishopsgate and n2 Nova Evolved in London and the Aviva Studios build in Manchester – with judges praising their ‘outstanding quality by showcasing structural steelwork at its finest’. A fourth William Hare project, Paddington Square in London, won a commendation, with judges praising ‘a landmark structure visible through layers of diaphanous steel and glass elevations’. Judges at the Structural Steel Design Awards, said of the 8 Bishopsgate project: “Eschewing the creation of a simplistic city icon, this 50-storey building successfully combines a fragmented form, determined by function and site constraints, with a rigorous structural system. Impeccably constructed through a Construction Management contract, this is a top-class project.” The project was also a big winner at the CTBUH Awards, with the 50-storey, 203-metre-high skyscraper winning the award for Best Tall Building by Height, 200–299m. Battersea Power Station Phase 2, a complex and challenging project for which William Hare supplied a total of 20,000 tonnes of structural steel – including one of the largest single pieces of steel ever manufactured in the UK – won the Construction Award. While the Structure Award was won by 21 Moorfields, a 17-storey all-steel structure erected over an operational London Underground station – which was described as a remarkable feat of engineering. Matthew Nesbit, Group Board Director at William Hare Group, comments: “We are delighted to have played our part in ensuring these buildings are recognised among the very best in the construction sector. We’re honoured to work with such fantastic colleagues from across our industry to help shape London’s skyline." “Some of these projects required complex and innovative solutions to ensure they came to fruition. For 21 Moorfield, the construction methodology demanded a temporary works solution that navigated the fully operational underground stations beneath. We needed to build in a very specific sequence that was derived by some very complex engineering assessments. A true test of the skills and ingenuity of our fantastic team.” William Hare Group was established in 1945 and provides value-engineered steel solutions to some of the world’s most innovative and sustainable construction projects. A family-owned and run business, it has a turnover of c£300 million and employs 2,000 people worldwide. Picture caption: The 8 Bishopsgate project in London has won two major industry awards.

Marking a huge win for UK horticulture growers, many of them family owned that have been in the family for generations, British beetroot will now be allowed to enter the United States (US) for the first time fresh off the back of a delegation of NFU and government representatives visiting the country to promote UK agriculture. During the trip, NFU President Tom Bradshaw and NFU horticulture and potatoes board vice chair Stephen Shields visited a UK horticulture business in the State of New York that processes and sells beetroots. Local supply wasn’t keeping up with demand and the delegation made the case to officials in Washington D.C. that importing products from England could boost sales and benefit both UK and US growers. NFU President Tom Bradshaw said: “It is great news that after many years of campaigning, British beetroot growers will have access to the market in the United States (US) for the first time. Being able to access the US market, supplementing local production, will help to meet rising consumer demand for this healthy, nutritional crop, creating genuine growth opportunities for farmers and growers in the UK." “I am especially delighted that this announcement comes days after we returned from the US where we were able to make the case for UK beetroot directly to government officials. Industry collaboration with government and especially with the UK’s agri-food attaché based in Washington has been key to resolving this issue." “It shows the type of wins we’re able to achieve with the UK’s expanded network of agriculture attachés following a number of years of campaigning by the NFU for the creation of these positions. Long may the collaboration continue so British farmers and growers can expand into further markets and increase sales of great British food overseas.” NFU horticulture and potatoes board vice chair Stephen Shields said: “As a grower, I am excited about the historic opportunity for UK beetroot to be exported to the US for the first time. It also shows just how important the trade visits the NFU conducts are and the opportunities they can deliver for businesses on the ground." “This milestone not only enhances our market presence but also aligns with our ambition to grow the UK horticulture sector. By meeting the increasing demand for high-quality British produce, we can drive innovation and investment in our industry, benefiting growers and consumers alike."

Running a family business can be deeply rewarding, offering the opportunity to build and nurture a legacy across generations. However, it also brings unique challenges, as the blending of personal relationships and business operations can give rise to conflicts and disagreements. Unlike in non-family businesses, where disputes can often be left in the office, tensions in family businesses have the potential to spill over into personal lives, making it crucial to maintain harmony for both business success and family well-being. Effectively managing disagreement and maintaining harmony requires a combination of clear communication, proper governance, and emotional intelligence. Here, we explore the best ways to manage conflict in family businesses and ensure smooth relationships that foster both personal and business growth. 1. Establish Clear Roles and Responsibilities One of the most common sources of conflict in family businesses is the blurring of roles and responsibilities. Family members may feel entitled to certain roles based on their position in the family, rather than on their skills or qualifications. This can lead to power struggles, unclear expectations, and frustrations over who is responsible for what. Solution: Define Roles Clearly and Early To avoid confusion and resentment, it is essential to clearly define roles and responsibilities from the outset. Each family member involved in the business should have a specific job description, detailing their duties and how their performance will be measured. These roles should be based on merit and expertise, not family hierarchy. Setting these boundaries early on ensures that everyone knows their place in the business, preventing overlaps and misunderstandings. For example, if one family member is better suited to operations while another excels in finance, their roles should reflect these strengths. Documenting roles in a family business agreement or constitution can formalize the arrangement, ensuring clarity and accountability for everyone. 2. Develop Open and Transparent Communication Channels Poor communication is a significant cause of conflict in any organisation, but in family businesses, the stakes are even higher. Personal relationships can cloud business conversations, and assumptions or unspoken expectations can lead to misunderstandings. Without clear communication, small disagreements can quickly escalate into larger issues that affect both business performance and family harmony. Solution: Foster Open Communication and Regular Meetings To maintain harmony, family businesses should prioritise open and transparent communication. Regular family meetings can provide a platform to discuss business updates, raise concerns, and address any grievances before they escalate. These meetings should be structured and professional, with a clear agenda, to ensure that business discussions don’t veer into personal matters. Encouraging family members to voice their concerns openly—and listening without judgment—can prevent misunderstandings from festering. Creating a culture of honesty and openness, where family members feel comfortable expressing their opinions, helps resolve conflicts early on and ensures that everyone feels heard. 3. Establish a Formal Governance Structure One major difference between family businesses and non-family businesses is the lack of formal governance in many family-run firms. In many cases, decisions are made informally, leading to inconsistent decision-making processes, unclear authority, and potential conflicts over who has the final say on important business matters. Solution: Implement a Formal Governance Structure Creating a formal governance structure is crucial for maintaining harmony in a family business. This may involve setting up a board of directors or advisory board that includes non-family members, bringing an objective, third-party perspective to decision-making. Having a formal governance structure can help ensure that decisions are made based on what is best for the business, rather than on family dynamics or emotions. Additionally, having a clear process for decision-making—such as majority votes or a consensus-based system—can reduce conflict and give all family members a voice in the business without resorting to informal, emotionally charged debates. 4. Separate Business from Family Life One of the most difficult aspects of running a family business is the intertwining of personal and professional relationships. Disagreements in the business can strain family relationships, and personal conflicts can spill over into business discussions. Maintaining a healthy separation between the two realms is key to preventing conflicts from escalating. Solution: Set Boundaries Between Business and Family To avoid the common pitfall of mixing personal and business matters, it’s important to establish boundaries between family life and work. For example, family gatherings, such as holidays or dinners, should be designated as "business-free" zones, where work-related discussions are off-limits. This helps preserve family bonds and ensures that personal relationships are not tainted by business conflicts. Additionally, during business hours, family members should be treated as colleagues, with the same professional standards applied to them as to non-family employees. This helps create a sense of fairness and professionalism in the workplace, reducing the potential for favouritism or resentment. 5. Create a Family Business Constitution A family business constitution is a formal document that outlines the values, vision, and operational principles of the family business. It also defines how decisions will be made, who is eligible to work in the business, and how disputes will be resolved. This document can serve as a guide for navigating conflicts and ensuring that the business is run according to agreed-upon principles, rather than based on personal emotions or whims. Solution: Draft a Family Business Constitution with Input from All To create a family business constitution, it’s important to involve all key stakeholders in the process. This ensures that the document reflects the views and aspirations of the entire family, not just one person or generation. The constitution should address issues such as: How leadership transitions will be handled Guidelines for family members working in the business Succession planning and the distribution of shares or ownership Processes for resolving disputes By having a family constitution in place, family businesses can prevent many conflicts before they arise, as there will be a clear, agreed-upon framework for handling disagreements and decision-making. 6. Plan for Succession Early Succession planning is one of the most contentious issues in family businesses. Disagreements over who will take over the leadership of the company can create rifts between family members, especially when multiple generations are involved. Without a clear succession plan, leadership transitions can become fraught with conflict and instability. Solution: Create a Transparent and Inclusive Succession Plan To avoid disputes over succession, it’s essential to create a clear and transparent plan well in advance. The plan should outline who will take over key leadership roles, the timeline for the transition, and the criteria for selecting the next leader. Involving the family in discussions about succession can help ensure that everyone is on the same page and reduce the potential for conflict. Moreover, the succession plan should focus on merit and business needs, rather than solely on family ties. If a family member is not ready or qualified to lead the business, alternative arrangements—such as bringing in an outside CEO—should be considered. The goal is to ensure the continued success of the business while managing family expectations. 7. Use Mediation or External Advisers When Necessary Despite best efforts, conflicts may still arise in a family business. When disagreements become intractable, and communication breaks down, it’s helpful to bring in a neutral third party, such as a mediator or family business consultant, to help resolve the conflict. Solution: Seek Outside Help for Conflict Resolution Mediators or external advisers can provide an objective perspective and facilitate productive conversations between family members. Their role is to help the family find common ground and develop solutions that benefit both the business and family relationships. Involving a neutral party can also help de-escalate emotionally charged situations, allowing for more rational and business-focused decision-making. Many family businesses also benefit from hiring external advisers, such as financial planners, legal experts, or business consultants, to help with succession planning, governance, and strategic decisions. These professionals can offer unbiased advice that helps prevent family conflicts from derailing the business. 8. Encourage Professional Development for Family Members Family members working in the business may face unique challenges, such as pressure to live up to expectations or uncertainty about their career paths. Without the right guidance and development opportunities, family members can become frustrated, leading to dissatisfaction and conflict. Solution: Invest in Training and Development for Family Members Encouraging family members to pursue professional development, both inside and outside the business, can help them build the skills and confidence they need to succeed in their roles. Offering mentorship programmes, leadership training, and opportunities for growth within the business can ensure that family members feel supported and valued. At the same time, setting clear expectations for performance and accountability—just as you would for non-family employees—can help prevent resentment or feelings of unfairness. By investing in the personal and professional development of family members, the business can ensure that they are equipped to contribute effectively and harmoniously. Maintaining harmony and managing disagreements in a family business requires a proactive approach. By implementing clear communication channels, establishing boundaries between family and business, and creating formal governance structures, family businesses can avoid many of the conflicts that typically arise from mixing personal and professional relationships.

In the space of one year, social awareness has escalated and brought the world together in dealing with the health, financial and commercial impact of COVID-19. The way businesses work has changed. How they engage with other people has changed. Their expectations of the companies with whom they choose to do business have grown and intensified. This has energized businesses of many types to reflect on their purpose and values, their capability to deliver what really matters and to do so in a financially, environmentally and socially responsible way. The rise of purpose-driven leadership The importance of a company’s purpose and its role in making the world a better place for today and for future generations have come into stark relief throughout the pandemic. The result is that more companies are taking a deeper look at their businesses to understand the impact of their actions across a spectrum of their stakeholders. While the acceleration of digital transformation during COVID-19 has garnered a great deal of media attention of late, I believe the transformation of many companies’ entire business operations are being accelerated through the ESG lens. A long-term mindset, sense of purpose and the importance of creating and sustaining a legacy are already central to how family businesses define success. It is built into the DNA of every generation and has guided how they have conducted business and addressed the needs of their stakeholders for decades. For this reason, I believe that family businesses are in a prime position to influence how companies go about reshaping their business operations through purpose-driven leadership. As one family business leader summed it up, “ESG is not a series of special projects. This is a reflection of who we are and how we choose to do business.” The evolution of ESG in family businesses I am beginning to see a new ESG perspective among family businesses themselves. They already have a well-established, purpose-driven mindset. Social concerns have historically been very important to family businesses as a reflection of the family’s values, and in response to COVID-19, their philanthropic activities and stakeholder commitments were heightened even further and that is unlikely to change. Similarly, governance has always been high on the agenda for family businesses in balancing the needs and actions of both the business and the family. Family businesses with the strongest governance practices generally performed better throughout the pandemic because they already had thorough procedures and mechanisms in place to identify and manage unexpected risks. Even so, those practices were put to the test in many family businesses and found to be inadequate for anticipating the risks on the scale of a global pandemic. As a result, COVID-19 has helped to accelerate the evolution of the ESG agenda in family businesses. The revolution in digital technologies combined with the pressing need to adopt more robust environmental, social and governance practices has motivated more business families to begin reimagining the future. I believe this self-examination is due, in part, to the increasing influence of next-generation family members who are embracing ESG because it fits so well with their values. They see the vital role that it can play in transforming their businesses and making their success more sustainable. They also understand the value that technology brings to their business operations by introducing advanced solutions for collecting and analysing essential data for anticipating risks, gauging the success of their company’s business strategy and measuring the impact of ESG initiatives. With these advanced analytical capabilities, I expect to see changes ahead in the priorities and actions of family businesses and an increased focus on the environmental impact of their operations in the fight against climate change. Not only are these some of the right things to do, but business families have also recognized the commercial imperative of ESG. Concrete strategies and actions around environmental, social and business oversight concerns are fast becoming competitive factors that are affecting many companies’ ability to win new business. This new competitive reality was reinforced to me recently by the executive of a family-owned construction firm who described how his firm had lost a tender bid to a key competitor specifically because their company had a more embedded ESG strategy. Advancing the ESG agenda The urgent need to achieve greater sustainability in the world and in many businesses is putting ESG at the centre of the impetus for change. It is also helping to create the imperative for a new kind of leadership that focuses on the sustainability of the strategies that businesses adopt and the impact of their collective actions. Before embarking on this important ESG journey, I believe there are two important questions that family businesses should consider: 1. What is the most important goal they want to achieve? Creating an ethical supply chain Satisfying customer choice Decarbonization to reverse climate change Accessing sustainable finance 2. Where might they need to invest to support their ESG strategy? Advanced technology and data People and pay Corporate reporting Local community relationships and partnerships There is no question in my mind that the pandemic has been transformational on many different levels. It has also increased an appreciation for the fact that family businesses are in it together to address the impact they are having on the world and what they are leaving behind for future generations. I believe it is imperative that they get the answers right by leading with purpose and the actions they choose to take.

Purpose has been taking a bashing. Terry Smith, the renowned fund manager, recently rebuked Unilever for their focus on purpose: “A company which feels it has to define the purpose of Hellmann’s mayonnaise has in our view clearly lost the plot. The Hellmann’s brand has existed since 1913 so we would guess that by now consumers have figured out its purpose (spoiler alert – salads and sandwiches)”. Ouch. Looking at the purpose statements Unilever has created for its brands, it’s easy to feel that perhaps Smith is right to call the emperor out over his new clothes. Unilever says the purpose of Hellmann’s is: “To inspire and enable 100 million consumers every year to be more resourceful with their food and waste less.” Knorr stock cubes exist to “reinvent food for humanity.” Research suggests that Smith is in tune with the mood of the nation. Chief executives are 50% more likely to use social media to raise social and political issues than to talk about their customers or employees according to a study by Hanbury Strategy and Stack Data Strategy, the advisory firms. Yet the same study found that 56% of people believe that businesses do not understand and reflect their priorities. Is it time to dispense with purpose? Or is the issue with the way it’s used and the grandstanding purpose statements that companies so often create? After all, Hellmann’s recorded 10% year-on-year sales growth in its most recent reported quarter. The origins of purpose can be traced back to 1968 and a book by Chester Barnard in which he states that one of the essential functions of the executive is “to formulate and design purpose”. This idea goes to the heart of what a business is. The definition of a company is a number of persons united or incorporated for joint action, especially for business. The joint action is the company’s purpose. Being united by a common cause is crucial to a successful business. Jim Collins, in his study of companies, Good to Great, observed: “That extra dimension [of great companies] is a guiding philosophy or a ‘core ideology’.” Doshi & McGregor in Primed to Perform find that: “[A strong brand identity] unites your team with a common objective, behavioural code, heritage and traditions. It feeds a total motivation culture.” The problem is that purpose has become equated with social purpose. The phrase “purpose beyond profit” has become commonplace, as though purpose and profit are separable. In fact, the purpose of the business – it’s raison d’être that unites employees and attracts customers – is the thing that generates the profit. For some companies their purpose is a social one. Patagonia’s purpose is “to build the best product, cause no unnecessary harm and use business to inspire and implement solutions to the environmental crisis”. This mission has been baked into the business from the start, born of Yvon Chouinard’s founding vision. It has a transparent supply chain, promotes social justice for its workers and creates durable products that, wherever possible, are made from recycled, fair-trade or organic materials. Not every company will have a purpose that’s social. When businesses try to bolt on a social or environmental cause, that’s when problems occur. Last year Innocent created a television advert showing people of the world sailing a boat towards the edge of a waterfall while singing: “We’re messing up the planet, we’re messing up real good”. Last time I checked, Innocent sell convenience-based fruit juices in single-serve, single-use plastic bottles. Their advert feels a touch hypocritical. This isn’t to say that they shouldn’t – like everyone – be doing everything possible to address social and environmental issues. But it’s not their purpose. They’d be far better reconnecting with their original vision, which was around healthy, nutritious drinks. Family businesses are well placed to know their purpose and keep it alive within their companies. The purpose of a business often stems from the founder. When this person leaves the business, the purpose can get lost or diluted. Family businesses have a bloodline between the founder and subsequent generations. They are well place to carry the torch and keep the flame alive. Doing so is powerful because it is what unites the interests of the family with the people they employ. It is everyone’s common cause. And the purpose should set the direction for developing values that foster the right behaviours in the business. While purpose has taken a beating, if understood and used correctly then it’s still a powerful force within a business. About the Author - Rob Gray is the Managing/Strategy Partner at Squad - a brand building firm from Manchester. He is well versed in the world of family business having worked with many family firms over the years including the likes of JW Lees Brewery, Vestey Group Holdings, Martin Moore and Tebay and Gloucester Services. www.squad.co/position-project.

As family businesses transition from one generation to the next, the emphasis on equipping the next generation with the right competencies becomes increasingly crucial. Responsible ownership and shareholding require more than just a stake in the company; it demands a blend of skills, knowledge, and attitudes that align with both the business’s legacy and future aspirations. This requires attention and it is essential for next-generation family members to develop these competencies and how they can be effectively nurtured. The Importance of Competency Development Family businesses are unique in that they blend personal and professional spheres, requiring the next generation to manage not only the business but also family relationships and expectations. Competent future owners and shareholders are pivotal in ensuring the continuity and success of the enterprise. Developing the right skills helps them navigate complex dynamics, make informed decisions, and uphold the family’s legacy while driving innovation. Key Competencies for Responsible Ownership Financial Acumen: Understanding Financial Statements: Future owners must grasp financial statements, balance sheets, and profit and loss accounts to make informed decisions about investments, dividends, and overall business strategy. I nvestment Knowledge: Competence in evaluating and managing investments is crucial for maintaining and growing family wealth. Strategic Thinking: Long-term Vision: Responsible owners should be able to think strategically about the future of the business, balancing short-term gains with long-term sustainability. Change Management: Adapting to market changes and technological advancements requires strategic foresight and the ability to lead through transformation. Leadership and Management Skills: Effective Leadership: Next-generation leaders must inspire and guide teams, foster a positive culture, and manage family and non-family employees effectively. Conflict Resolution: Being adept at resolving conflicts within the family and the business ensures smooth operations and maintains morale. Governance Knowledge: Understanding Governance Structures: Familiarity with governance frameworks, including boards of directors and family councils, helps in overseeing business operations and ensuring accountability. Compliance and Regulation: Knowledge of legal and regulatory requirements is essential to navigate complex business environments and avoid legal pitfalls. Emotional Intelligence: Interpersonal Skills: Building and maintaining strong relationships within the family and with external stakeholders requires empathy, communication skills, and emotional resilience. Stress Management: Managing the pressures of ownership and shareholding effectively is crucial for personal well-being and sound decision-making. Strategies for Developing Competencies Formal Education and Training: Business Education: Encouraging formal education in business management, finance, and entrepreneurship provides a solid foundation for future roles. Specialised Training: Courses and workshops focused on governance, leadership, and conflict resolution can further enhance specific competencies. Mentorship and Coaching: Family Mentors: Learning from experienced family members provides valuable insights into the unique dynamics of the family business and its culture. External Coaches: Engaging with professional coaches or advisors can offer an unbiased perspective and specialised skills development. Practical Experience: Rotational Roles: Gaining hands-on experience through various roles within the business helps understand its operations and challenges from multiple perspectives. External Work Experience: Working outside the family business exposes future leaders to different management styles and industry practices, enriching their overall competency. Governance Participation: Involvement in Governance: Actively participating in family councils, advisory boards, or committees provides practical experience in governance and decision-making processes. Simulation Exercises: Engaging in simulated board meetings or strategic planning sessions can enhance governance skills in a controlled environment. Family Business Education Programmes: Family Business Organisations: Programmes and seminars offered by family business organisations and universities/colleges provide comprehensive education on managing family dynamics, succession planning, and business strategy. Networking Opportunities: Participation in family business networks allows future leaders to connect with peers, share experiences, and learn from others in similar situations. Global Perspectives The emphasis on developing competencies for next-generation family members varies globally, influenced by cultural, economic, and family dynamics. In many Western countries, formal education and professional experience are heavily emphasised, with a strong focus on structured governance and strategic planning. In contrast, family businesses in other regions might prioritise traditional values and familial connections, adapting competency development strategies to align with local practices and expectations. The development of essential competencies is crucial for the next generation of family business owners and shareholders. By focusing on financial acumen, strategic thinking, leadership skills, governance knowledge, and emotional intelligence, future leaders can effectively manage the complexities of family business dynamics. Implementing strategies such as formal education, mentorship, practical experience, and participation in governance prepares them to uphold the family’s legacy while driving the business forward. Ultimately, investing in the development of these competencies ensures that the family business remains resilient, innovative, and successful across generations.

The three-circle model of family business, introduced by Renato Tagiuri and John A. Davis in the 1980s, provides a comprehensive framework for understanding the intricate dynamics that characterise family businesses. This model delineates three distinct but interconnected circles, each representing a crucial aspect of family business: the family, the business, and ownership. It has become a foundation in the understanding of the dynamics that make family businesses what they are and the basis for many advisers to have conversations with their clients. Whilst it may appear simple in concept, the nuances and human interactions between the different individuals and their personal drivers and purpose make it an incredibly complex situation too. It is at the very heart of the family business community but it is easy to take it for granted and for anyone new to the sector, it is worth considering and reflecting on the model, what it encompasses and how it might reflect each and every family business differently. The first circle, the family, encapsulates the emotional and interpersonal relationships among family members involved in the business. It acknowledges the impact of family dynamics on decision-making, communication, and conflict resolution within the business context. Issues such as sibling rivalry, succession planning, and the integration of family values into business practices fall within the purview of this circle. Striking a balance between family harmony and effective business management becomes a central challenge. The second circle, the business, focuses on the operational aspects of the business. Here, the emphasis is on strategy, performance, and competitiveness. It addresses concerns such as market dynamics, innovation, and the overall health of the business. In this circle, family businesses grapple with the need for professional management and governance structures to ensure sustained success beyond generations. The third circle, ownership, pertains to the ownership structure and financial aspects of the family business. This involves issues like equity distribution, ownership agreements, and wealth management. Divergent expectations among family members regarding dividends, reinvestment, and exit strategies often surface within this circle. Effectively aligning the interests of family members with the long-term financial goals of the business becomes a critical challenge. The strength of the three-circle model lies in its recognition of the interdependence among family, business, and ownership. Changes or decisions in one circle inevitably reverberate across the others. For instance, a family dispute may spill over into the business operations, impacting performance. Likewise, a strategic business decision may have implications for family relationships and the ownership structure. Successfully navigating the complexities outlined by the three-circle model requires a thoughtful approach to governance. Establishing clear communication channels, developing sound policies for conflict resolution, and delineating roles and responsibilities are essential steps. Additionally, embracing external expertise through advisory boards or consultants can provide valuable insights and contribute to the professionalisation of family businesses. In conclusion, the three-circle model offers a holistic framework for understanding the multifaceted nature of family businesses. By acknowledging and addressing the distinct challenges within each circle – family, business, and ownership – family enterprises can enhance their resilience and increase the potential for them to pass from generation to generation successfully. Balancing the often competing interests within these circles is an ongoing process that requires commitment, adaptability, and a strategic mindset.

Family businesses are the lifeblood of many economies worldwide, representing a staggering 85% of all global businesses, employing significant numbers of people, generating wealth and providing incomes. These businesses, which blend personal relationships with professional aspirations, offer unique advantages but also face distinct challenges. At the heart of their long-term success lies the critical need to effectively manage family dynamics and to create a framework that enables family members to perform whilst providing every opportunity for them to do so to preserve their relationship too. The dual nature of family businesses often contributes to their initial success. At their outset, family firms are often created with a shared vision where trust, and commitment among family members can drive rapid growth and foster innovation. However, as these businesses expand and evolve, the intertwining of family and business affairs becomes increasingly complex. This complexity necessitates a delicate balancing act between familial expectations and business imperatives. One of the most significant challenges facing family businesses is succession planning which includes the difficulty of transferring leadership and ownership across generations. Many families struggle to identify and prepare suitable successors, often leading to conflicts or a lack of direction when the founding generation steps down. Power conflicts represent another major hurdle that those involved in a family business may encounter too. As family businesses grow, so too does the potential for internal feuds among siblings, cousins, and other relatives. These disputes can arise from differing visions for the company's future, unequal levels of involvement, or perceived favoritism. Left unaddressed, such conflicts can escalate, potentially leading to business failure or painful family rifts. The concept of emotional ownership can also be seen as a double-edged sword in family businesses. On one hand, it can foster a deep sense of commitment, driving family members to go above and beyond for the company's success. This emotional investment often translates into a long-term perspective and a willingness to weather short-term challenges. On the other hand, it can cloud judgement, making it difficult to make objective decisions, especially when they might negatively impact family members. To build a lasting family business that can thrive across generations, owners must focus on several key areas. First and foremost is the establishment of a robust governance structure is essential. This typically involves implementing formal processes and potentially bringing in non-family directors or advisers to provide objective perspectives. A well-designed governance framework can help separate family and business issues, ensuring that decisions are made in the best interest of the company and put measures in place to protect the long term relationship of the family with the business too. As previously mentioned, succession planning is another critical element. Developing a transparent, well-structured plan for leadership transition can help ensure business continuity and minimise conflicts. Clear communication and honest, authentic conversations between the generations and everyone engaged in the process is essential to minimise the risk of the process derailing but it is really important that this process starts early, allowing ample time for potential successors to gain the necessary experience and skills. In many cases, as soon as a successor has been appointed to lead the business, the next succession process should be in the minds of everyone looking at the longer term plan for both the family and the business too! Effective leadership is paramount in any business, but it takes on added importance in family enterprises. Investing in leadership development for family members who are involved in the business can help ensure they have the skills and knowledge needed to guide the company successfully. This may involve formal education, mentorship programmes, or gaining experience in other companies. Open communication is vital in managing family dynamics within a business context. Creating forums for honest dialogue can help address emotional issues before they escalate into conflicts. Regular family meetings, separate from business meetings, can provide a platform for discussing concerns, aligning expectations, and reinforcing shared values. Separating Family And Business One of the most challenging aspects of running a family business is maintaining a clear distinction between family matters and business operations. It's crucial to establish and enforce boundaries that prevent personal issues from spilling over into professional decision-making. This separation helps maintain objectivity in business dealings and reduces the risk of emotional conflicts impacting the company's performance. Families should strive to create a culture where business discussions are confined to appropriate forums, such as board meetings or scheduled strategy sessions, rather than dominating family gatherings or Sunday lunches. Nurturing Family Relationships Outside The Business While the business often serves as a unifying force for the family, it's equally important to nurture relationships outside of the professional sphere. Encouraging family members to pursue individual interests and fostering connections that aren't solely based on business can lead to a healthier family dynamic. This approach helps prevent the business from becoming the sole focus of family interactions and reduces the risk of burnout or resentment. Regular family retreats, shared hobbies, or philanthropic activities unrelated to the business can strengthen bonds and provide a much-needed balance between personal and professional lives. By investing in these non-business relationships, families can build a stronger foundation of trust and understanding that ultimately contributes to the long-term sustainability of both the family unit and the business. Finally, a thoughtful human resources strategy is crucial for creating the right environment for both family and non-family employees. This includes clear policies on hiring, promotion, and remuneration to ensure that all employees are treated fairly, regardless of their family status. While family businesses face unique challenges, they also possess inherent strengths that can set them apart in the marketplace. By proactively addressing family dynamics through robust governance, succession planning, leadership development, open communication, and fair HR practices, these businesses can harness their unique advantages while mitigating potential pitfalls. In doing so, they can set the stage for multi-generational success, creating legacies that extend far beyond the founding family members. The key lies in recognising that managing a family business is not just about running a company—it's about nurturing a complex ecosystem where family and business interests must be carefully balanced for long-term prosperity.