A major survey into the features, characteristics and challenges of the UK’s family businesses has revealed there’s a changing face of the family unit working together in family firms today, with 25 percent having so-called ‘blended families’ and an increase in the generations working together.
The survey, conducted by Families in Business (FiB), the independent organisation dedicated to supporting family firms, identified how the changing face of the modern family is evidenced within a growing proportion of family businesses as a result of divorces and second marriages that, in turn, has led to a growing number of step and adopted children joining a family business.
Additionally, the research findings confirmed the multi-generational structure of the vast majority of family firms – with 12% having directors over 81 years old who are still involved in the business, and 33% with directors aged over 71 years old. The majority of family firms (45%) have two generations working in the business, with 18% having three and 2% with five generations still involved in the day-to-day running of the family firm.
The average age of a CEO of a family firm is 60, according to FiB’s survey, compared to 54 years old in all other businesses in the UK, whilst the average age for a founder to start their business is 40 years old. But males continue to dominate the boardroom influence and leadership of family businesses, with 82% having men in the most senior positions, and just 18% being females.
Alongside, uncovering if and how family firms are mirroring the changes in society and modern family life, FiB’s survey also challenged the ongoing governance matters ever-present in a family firm, with some startling results – only 4% of family firms have a robust succession plan in place, and less than a quarter (19%) have a shareholders agreement.
With statistics indicating that in nearly half of all family business collapses, the failure of the business is precipitated by the founder’s death, the survey also set-out to explore the level to which family business are ‘future-proofing’ themselves. The findings reveal only a small minority of family firms have actually planned for the unexpected or unimaginable, and yet almost half (48%) admit they would be vulnerable if something happened to key directors and family members, with the same number recognising that this is a real and potential threat for the business.
Open and trusted communication, particularly to discuss succession and shareholder agreements within a family business, continue to be a significant challenge, with 74% seeing this as a problem at the heart of the family business, an increase of 5% on the findings of the FiB survey in 2014.
Professional advisers are the main individuals that family business leaders turn to for support, according to the survey, followed by friends or acquaintances, whilst family members are third on the list. However, the survey identified a growing paradox between what professional advisers believe family members want from their business, and what the owners and leaders actually want.
49% want growth for the family business with exit firmly in mind, 27% strive to ‘build something’ to be handed-on to the next generation, whilst 26% admit they most enjoy the lifestyle the family firm enables. However, advisers are 100% focused on succession, stating they believe this to be the main purpose for all family members working in the family firm and at best offering technical expertise rather than also considering the more emotional challenges associated with this.
Commenting on this year’s survey and report, FiB’s founder and CEO Dani Saveker said: “The family unit continues to change and now more than ever there is the potential for more generations of one family to be working within it, with the average being three or more generations.
“This year’s survey findings have once again proved fascinating. This is the third year we have conducted our survey across the UK that involved hundreds of family firms and professional advisers. The research also included a series of in-depth one to one interviews with family business leaders which revealed a rise in the number of same sex partnerships working alongside in the business, and highlighted the growing numbers of women working in a family business that are delaying having children until well into their thirties.
“This means children will not be mentored by parents in the family business as they once always were - ‘learning alongside’ them is less possible and if anything happens to their parents there’s an increased risk and gap of suitable next generation leaders ready to take the baton; a situation exacerbated by the low number of family businesses with a clear succession plan.
“Many of the findings are concerning, from this lack of succession planning, as well as the absence of any belief amongst family firms that succession and shareholder agreements are necessary, to growing reliance on substances such as alcohol - almost half of those taking part in the survey - or activities to help them cope with the day to day pressures.
“The survey has gathered information on how family businesses are planning for the future and next generation through succession planning, shareholder agreements and access to finance, but also how they are prioritising investing in future opportunities and innovation, whether through R&D, people, training, skills, or talent. It has also examined professional advisers, intermediaries, stakeholders and service providers to family businesses to identify exactly how well they understand family owned businesses, which are so different from other ‘conventional’ businesses.
“There would also seem to be a paradox emerging of what professional advisers believe family businesses want from them and their family business. Our survey findings point to a need for helping the business to succeed and grow, and not purely with succession in mind, as advisers seem to be focused upon. Perhaps advisers should review how and what questions they ask their family business clients, so that they uncover accurate insights and data. It’s not an easy task as family businesses are fundamentally private and uncomfortable with transparency, but a shift in emphasis is definitely in order. This is something that we feel very strongly about particularly as the professional services is facing its own revolution and will continue to see a shift towards adding far greater value to their clients over the next 10 years.”
The FiB Annual Guide 2015/2016 - ‘The Future Landscape’ - includes the surveys key findings and practical advice from FiB and its network of advisers. Members of FiB receive a complimentary copy, or the report can be requested via FiB’s website www.fibcommunity.com.