The challenges of running a family business

In partnership with Anderson Strathern.

Family concerns: Making their point during the round table. Picture: Jane Barlow

FAMILY businesses are the bedrock of the Scottish economy: 71 per cent of small and medium-sized enterprises are classed as such and family businesses contribute 46 per cent of Scotland’s gross domestic product.

So what are the opportunities – and challenges – for family businesses in Scotland? Are family businesses with strong, talented female leaders different to those dominated by men? Do women bring different qualities to the table? A group of female business leaders met to discuss the issues. They are:

Ruth Maclean (RM), a partner in the commercial real estate department at law firm Anderson Strathern.  She has a particular focus on working with family businesses in the purchase and sale of residential and commercial properties.

Mairi Mickel (MM), who runs a consultancy specialising in succession planning – Mairi Mickel’s Business Families – to help families tackle the complexity of leadership transition. She was a main board director and fourth generation owner of 90-year-old Scottish construction family firm, Mactaggart & Mickel. She is chair of her family’s Philanthropic Family Office.

Jill Mitchell (JT), who has a property design and development partnership (with husband Andrew) specialising in the restoration and conversion of period and listed properties into luxury homes.  The firm has purchased Carberry Tower Mansion House and Estate, just outside Edinburgh, with a vision is to create a luxury Country House Hotel & Estate.

Miriam Smith (MS) is business development manager for Queen Margaret University (QMU), which starts a Smaller and Family Business MBA and MSc this year. She is responsible for working with businesses across all industry sectors.

Carole Tomlinson (CT) is a partner in the private client team at Anderson Strathern, dual qualified in Scotland and England. She holds the Society of Trust and Estate Practitioners Advanced Certificate in Family Enterprise Advising and heads up the firm’s families in business sector group

CT: Miriam, why did QMU launch this new MBA/MSc covering smaller and family business?

MS: Dr Claire Seaman [reader in enterprise and family business at QMU] is heavily involved in this area and researched family businesses and the challenges they face with the Goodison Group [which brings together education, business and government]. There is a lot of demand to help family businesses sustain themselves and in areas around succession. We will cover that in the course as well as finance and risk. It’s designed to help people who are returning to the family business or recent graduates going into the family business.

CT: So what characterises family businesses?

MM: UK corporates are often accused of being short-termist, while family businesses are the opposite and take a long-term view, which sets them apart. If you are answering to shareholders, it’s very different.

RM: It’s about building trust among your customers.

JM: Yes, but it has to be authentic.

MM: I think success can look very different in a family business; it’s not just about the bottom line. It might be about employing family members, working with the community or using the experience of the older generation.

MS: Do the younger generation take the advice of their elders?

CT: There can be conflict, around the older generation letting go and the younger generation being desperate to push on to take decisions.

MM: Some older members of family businesses who have been very entrepreneurial find it hard to define themselves outside the family business as they get older – and they don’t want to step back.

Mactaggart & Mickel is a fourth generation business and we have second and third generation employees and customers. But all businesses have to be careful if they have a workforce, who has been with them for a long time – you don’t want to get stagnant and you need to remain innovative and keep things fresh. Strong leadership and strong values are important.

RM: What about communication? Is that more difficult in a family business?

MM: It can be; we all make assumptions in a family scenario which is not helpful in business. It is a very complicated space between family issues and business issues. You need governance structures in place to ensure family issues do not come into the boardroom. Mactaggart & Mickel has a shareholders’ forum, chaired by a non-executive director, which allows everything to be aired – a full discussion of business performance, innovation and new ideas for business direction.

CT: It can be very complex – are you wearing a family hat, an executive hat, a shareholders’ hat? But there are some real benefits of family business. Many say there are fewer hoops to jump through and that you can make decisions in a much more straightforward way.

JM: Yes, decisions can be made and executed more quickly.

MM: That’s true, but you have to be careful of making decisions “off site” and then presenting them to the board as a fait accompli.

MS: Is there pressure for family members to go into the business, or is there freedom not to?

MM: It depends entirely on your family. My family is entrepreneurial and encouraged me to do things. At 28, I’d had a successful career in marketing and advertising and told my dad I wanted to come back into Mactaggart & Mickel and run the marketing department. He almost fell off his stool.

I think it’s good practice to do a degree and then have five years working in a relevant industry before deciding if you want to go into the family firm.

CT: Yes, you can get some excellent and relevant experience and come back and add value.

CT: When it comes to succession, is there any difference passing the business down through a male or female side?

RM: I think it depends on the nature of the business but things have changed hugely. When I went on maternity leave with my previous employer 17 years ago, no-one was working part-time. Now that almost seems laughable.

MM: I’ve worked for Women on Boards and we are clear that it takes two people to make a baby and that two people should bring up that baby. There are great opportunities now with paternity leave. More women are taking over the family businesses – especially in the service sector, though it is widening out.

MS: Lots of women are creating businesses in the food and drink sector.

MM: There are a lot more positive role models out there – really high-achieving women like Carolyn McCall at Easyjet and Janet Yellen at the US Federal Reserve.

CT: How do you get more women on to Boards? The figures are good for family businesses – 80 per cent have at least one female director, compared to 17 per cent of FTSE 100 companies.

MM: There is a lot going on around targets. There are targets for PLCs but not private businesses, so most family businesses are not covered. So it’s more complex – it’s about educating girls, about how you bring them through the business, the availability of role models. It’s also about women taking on more non-exec roles; I have two and there is more of a push to get women to do that earlier in their career through organisations like Changing the Chemistry, which I am involved in.

RM: Does it make a difference having women in board positions?

CT: Research shows that firms with at least one female board member have better financial performance – but what is it that those women bring to the board?

MM: There are lot of things – a different approach to talent management, in terms of spotting talent in the workforce and bringing women through. Women also tend to avoid groupthink and are more inclusive and more open to new ideas and challenges.

When you go into a family business, you have to prove you can bring value, make a difference. I was very careful to understand what was needed and to understand other people I would be working with.

I was brought up in a household that taught me to speak out and challenge things. I encountered some old-fashioned attitudes in the construction sector but I was encouraged to challenge them.

RM: Do women also handle conflict differently when you face up to challenges?

MS: Maybe, but I have seen some family businesses where women can also stir it up rather than managing conflict better than men.

MM: Conflict management is really important – maybe you should cover that on the course, Miriam?

JM: Sometimes managing conflict is about the right balance of personalities. Andrew and I are not volatile in the way we communicate; if we get stressed, we try to laugh things off. And we complement each other in the business – I have a legal background and deal with contracts and deals, while Andrew is very good with figures and leads on the budgeting and financial management – but we both ask the other about the decisions they have taken and understand why we made them.

MM: It is important to have a cohesive vision in a family business and to understand each other’s values. It can’t just be “It’s just dad” or “It’s just how my brother is” – you have to understand their professional values.

CT: It’s important for professional advisers to understand family businesses too. As a lawyer, my role is not primarily about legal advice, but about understanding the business and personalities and relationships within it, as well as its values and culture. It’s being a trusted adviser.

MM: The real value is in the conversations, not in drafting a new constitution.

MS: There are a lot of issues here about managing people, about advisory services, about managing conflict and nurturing women which I will feed back into the development of the new family business course. We need to perhaps tailor it to the practicalities a little bit more.

CT: Which family businesses do you think have got a good working model?

MS: I’d say Mackays [the Angus-based marmalade and preserves maker] have a good model of working and very good employee relations.

MM: The William Jackson food group (which makes Aunt Bessie’s Yorkshire Puddings) is very good. I did some leadership development with the sixth generation of the family and they are keen to educate the new generation by drawing on the family experience but also by bringing in external advisers. They have thought through their succession planning very strategically.

This article appears in the Spring 2016 edition of Vision Scotland. An online version can be read here. Further information about Vision Scotland here.