What can the 'Royal Birth' teach family firms about survival?

The flurry around the birth of little Prince George might have died down but family run businesses could learn a thing or two from the Royal family

by Lynn Martin
Last Updated: 09 Oct 2013

Had the Royal baby been 'Georgina', rather than 'George', she would have been third in line to take over the oldest 'family firm' in the land.
 
But other British family businesses are more reluctant to move with the times and pass the reins to their daughters. This contributes to 70% of these companies failing to make it to the second generation and 90% dying out before the third.
 
Considering that family firms deliver approximately 25% of the UK's GDP (circa £1.1 trillion turnover) and employ two out of every five people in the private sector,  ensuring their long term survival is a worthy goal.
 
Research undertaken by the Manchester Metropolitan University Centre for Enterprise  demonstrates a case of  'jobs for the boys'  when it comes to succession planning.
 
The in-depth study of 110 family firms  examined practice and attitudes within the manufacturing, hospitality, care and professional services sectors.
 
Interviews with the businesses, which each had 9-50 employees, showed that none had selected a female successor, or even considered it in many cases - despite the availability of strong existing candidates working within the businesses.  This is at odds with larger family firms where women do hold more senior roles more frequently than in no family firms (albeit gender parity is a long way away).
 
For those with succession plans, a male relative was lined up to take over (usually son or sons).  Female relatives were neither developed nor encouraged as managers, despite frequently acting as mentors and trainers for the selected male successor.  A common theme was that daughters were considered inappropriate for succession since they were considered "too good" for the workplace, or should be doing  "something better" like teaching, nursing or working as a professional.
 
Those businesses without succession plans, where the business owner was coming up to retirement, did not reinvest in the business in the same way as others with family succession plans. Their long-term plan focused on "selling-up" but not through careful planning and without building up the necessary value in their firms. This could have a damaging effect to the regional economy as assets are disbursed - rather than capital remaining in the business, and jobs are put at risk.
 
Five Royal lessons for survival of your family business
 
1.  Embrace Girl Power  - Without  harnessing the talents of  female relatives and preparing them to succeed, these family firms and many others across the UK are dramatically endangering their long term health and reducing life expectancy.  The best person for the job may be the woman already in your business. Family businesses are, indeed, the 'crown jewels' of UK economic growth and recovery, but the length of their 'reign' is seriously threatened  by overlooking  the 'female line'.
 
2.   Think long term - Short-termism spells trouble for family businesses, which are often in a unique position to plan ahead, invest for the future and build a sustainable enterprise that is in robust shape for the next generation.
 
3. Seek external support - Insularity can stifle success. Don't shy away from bringing in external resources. Where the right skills aren't available, seek third party involvement with the critical contacts or experience. Remember, however, to define roles clearly.
 
4.  Move with the times -  Reluctance to change and remaining rooted in the past can be kiss of death  for family businesses,  which need to maintain a strong sense of market awareness. The Royal family has demonstrated leadership in breaking with tradition, particularly in its recent constitutional changes on succession.
 
5.  Be an entrepreneurial family, not just an entrepreneurial owner - Buckingham Palace Tours and Duchy Originals demonstrate the commercial diversification of the modern monarchy. Spread the business ethos throughout your family to harness passion, enthusiasm and ideas.

Lynn Martin is Professor of Entrepreneurship and Director of the Centre for Enterprise at Manchester Metropolitan University School of Business and Law www.mmucfe.co.uk She is also President of the Institute of Small Business and Entrepreneurship and has authored a number of publications on gender parity.


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