In this interview, we talk to Elizabeth Bagger, the Director General of the Institute for Family Business, an organisation that champions family businesses as an integral part of both the wider UK economy and the communities they are founded in. Their mission is to promote family businesses, and to ensure they remain successful for generations to come.
Here, Elizabeth gives us her unique perspective on how family businesses maintain their core values, how owners can foster a sense of unity, and what makes this diverse collection of companies and partnerships so remarkable.
In your opinion, what are the three things that make family businesses special?
1) Their long-term outlook makes them very different. If you think in terms of generations, you will do things very differently to a business that thinks about the next set of quarterly results.
2) The personal ownership and transmission of values and behaviours when your name is above the door sets family businesses apart.
3) Legacy – real people, real stories. There is nothing more powerful than a family business leveraging its legacy in positive ways.
The word “culture” is often used by family business owners to describe what makes their business unique for them and those who work for the business (and often customers and clients too). In practical terms, what is your advice to family business owners for instilling in their employees and the next generation of business leaders a clear sense of the culture of the business?
I heard it said in a workshop I went to recently that people have values, organisations have cultures. It highlights quite nicely the link between the two and I believe that practically living the family business values is a great starting point. Looking at what we do in our business and what we don’t do on a daily basis is a good place to start.
When it works, it works beautifully and is very powerful. However, no one should kid themselves that this is easy. It requires ongoing and consistent engagement to ensure that values are followed in the business, with customers, suppliers etc.
Families often see themselves as guardians or stewards of the values and I think that’s really important. Equally important is to decide how to bring that to life. Different family businesses do it in different ways, but a key element we see most of the time is the family actively engaging with the business. It could be by visiting the businesses they own and talking to the people who work for them or by holding staff awards for instance.
It can often be difficult for a family business to maintain its core values during times of uncertainty and change. How do you see family businesses tackling this?
Families will often have clearly defined values to guide them and probably some examples of times in the past where that didn’t happen. Their values will act as guiding lights. (Because) many family businesses will say that their values set them apart and their “familiness” is a competitive advantage.
In terms of “future proofing” a family business, what are the most important things for family businesses to do when going through a period of expansion to preserve their roots and culture, but make space for growth and change?
Values are obviously important. Finding people who are aligned with your values and who see the family ownership as an advantage is key. It can be through sharing stories, and through the owners/family/family managers meeting with people in the business. We see many interesting examples including induction days with the family CEO, lunches or other forums where employees can share their ideas.
What are the key things to be aware of and manage for family businesses looking to introduce non-family members to the Board of Directors or senior management? Do you have any practical tips?
Clarity is a key factor. What are you asking them to do, what role do they fulfil? How is the family involved in the business, what decisions do the owners make? Make them feel welcome and appreciated. Family businesses are good at that, in my experience.
What can family business owners do to foster unity within the business and manage differences?
On the ownership side, a lot can be achieved by making sure family members feel heard, involved and that they matter. And of course, it’s important people feel they are treated fairly. Having agreed rules that, the family play by can be really helpful too. Outside help is often an advantage.
In your view, what is the most important role for a family business adviser, and where / when do they tend to add the most value?
I think some of the most important things advisers do are to help family businesses ask the right questions. Whether that’s about the purpose of their ownership or something more detailed or structural for example, when and how do we pass on shares to the next generation. Advisers can also help create a safe space where all parties involved can express their views and feel heard.
What are IFB’s priorities and goals for this year?
We continue to champion family businesses – both on an individual level and on a sectoral level. There is still plenty to do to promote the importance of the sector.
We’re focusing on family business culture at the moment. Exploring and explaining how family businesses are different is critically important. We see purpose - and values - driven businesses who contribute to the economy and society and we see a passion and an appetite to learn. That’s so important right now, on every level, from the macro to the micro.
We have ambitions to grow as we know family businesses benefit so much from sharing and learning together, so we wish to reach many more family businesses all across the UK.
If you require further information about anything covered in this briefing note, please contact Elizabeth Sainsbury, or your usual contact at the firm on +44 (0)20 3375 7000.
This publication is a general summary of the law. It should not replace legal advice tailored to your specific circumstances.
© Farrer & Co LLP, April 2019