In the run up to The Herald Family Business Awards, I noticed some parallels between many of the business families I work with in Scotland, and a well-known business family in the United States. This particular family business will continue to attract substantial interest and give rise to discussions on issues that will interest and affect Scotland’s family businesses.
The head of the family and business empire is a man in his 70s. This ties with many family businesses here in Scotland established by the ‘baby boomer’ generation in the 1950s and 60s to support their families in face of massive structural changes in the industrial base and employment. Many of these baby boomer founders are still at the helm of their families and businesses, with successive generations also involved in the business.
As social attitudes and behaviours evolved in the latter half of the 20th century it became common for family businesses to have “splinter” branches arising from failed marriages. To be in a third marriage is, I would suggest, somewhat less common here in Scotland. Where the wealth base is limited, the fracturing of families can have a significant impact on business performance and the long term prosperity of the family.
There will have been some impact on the US family’s wider wealth and prosperity as a result of these marital break-ups, albeit the overall impact is likely to have been less severe than I would typically see within my client base.
Retirement doesn’t come easy to the baby boomer founder. Having spent a life focused almost entirely on business and family, they often lack enough external interests. It is frequently easier to keep working than retire or develop new passions. Avoiding retirement is also a way of ensuring that children in the business are monitored and family harmony is maintained. Succession is the single most difficult issue faced by all families in business and the point at which most family businesses either fail entirely, or break up.
The US family is about to enter a period of either four or eight years of “forced retirement” through the founder being required to place all decisions relating to business activities at arms length while he takes up another leadership role.
This is an unusual situation and presents an interesting case study on the management and sustainability of family business. Will the senior family member be able to keep focus on the new day job without dipping back into the family business, despite publicly stating that is his intention? Will the children take the business in a direction approved by the founder? What will happen after the four or eight years of forced retirement – will life be returned to normal or will retirement become permanent?
Future events and issues will change matters for the family, and indeed all of us, over the next four or eight years. On a micro, family level, the dynamics at play are fascinating to those of us looking in from the outside. I doubt we will ever know the true extent of the impact of the forced retirement on the family and their business. It will not stop the speculation though!
Even if Scotland’s business families do not have the unique challenges that our US family is about to face, the question of succession management is still the biggest issue that families in business face. The simple act of talking about the issues is a big hurdle for many families to overcome. When business is all consuming and when it is easier to suffer in silence in order to keep harmony, families have a tremendous capacity to “just do nothing” about succession.
Doing nothing is the worst choice. Time and natural events inevitably intervene and can severely erode the family’s capacity to cope with change through a time of crisis. It is better to plan and act while the sun is shining, not when the storm is in full spate.
If you recognise this issue but don’t know what to do next, seek counsel from the various family business networks in Scotland, or speak to a professional formally qualified to advise families in business.