Post-COVID, post-lockdown, post-furlough; post-Brexit, post-Holyrood election, and post a possible independence referendum, family-owned businesses will continue to be the backbone of the private sector in Scotland.
The large ones like William Grant & Sons, Walkers Shortbread, Baxters, Stewart Milne and Robertson Group, along with hundreds of family-controlled SMEs spread across every town and community, will be a fundamental driver of economic growth, prosperity, and stability.
This is hardly news since families have been in business for most of recorded history, but what has changed is that advising these clients is now a distinct field of knowledge and practice. Business families are increasingly aware of this, and advisers need to decide, “Are we really in the family business market?”
Growth of the organisation
The change started in 1986, when the Family Firm Institute was founded as an organisation for advisers, consultants, educators, and researchers. FFI now has nearly 2,000 members in more than 80 countries, and 80% of them are professionals from various fields including law, accounting, banking, and financial services.
In 1989, the Family Business Network was founded by families for families. FBN is now a federation of 32 member associations spanning 65 countries, including the Institute for Family Business in the UK.
More recently, other family business associations have entered the market, through which the owners and leaders of these enterprises are gaining access to new information about how successful multi-generational family businesses across the world are organised.
Clients now recognise that there is a measurable difference between a specialist adviser who speaks the language of their specialism, and the specialist who can also speak fluent family business. Business families seek help with the task of developing a next generation who understand the rights and responsibilities of ownership, whether or not they choose a career in the family business. The senior generation would also like to discuss the challenges of retiring and passing on control, when they still want a life of purpose.
The current family owners and the board of directors would like to hear about the best way to ensure that the constitution of a business is matched by a family constitution that contains the family’s vision and values and provides guidance in potentially sensitive areas like employment and remuneration for family members.
In the midst of these inter-generational dynamics, what type of incentive scheme will align the interests of valued non-family managers with the aspirations of both generations of the owning family? Bear in mind that family businesses regularly attribute value to non-financial returns on investment, such as continuing a legacy, maintaining family cohesion, and an attachment to a particular type of business, place, or community. The challenge is how to quantify achieving these returns for the purpose of the incentive scheme.
Resource for advisers
There is no getting away from the fact that new research and ideas are disrupting the family business market, and clients want to know the go-to firms for advice. Being in the market obviously means being up to date with the latest thinking in the field. Here, FFI provides its members with many opportunities for learning and collaboration.
The FFI Global Education Network offers Certificates in Family Business Advising and Family Wealth Advising that are the product of more than 30 years of practice and research.
Cross-pollination of ideas, expertise, and perspectives among members takes place at conferences, seminars, and online. This year’s conference is a blended virtual and in-person event in London in October.
The Family Business Review is the leading scholarly publication devoted exclusively to exploring the dynamics of family-controlled businesses and family offices.
The weekly FFI Practitioner provides thought-provoking analysis, trends, and research affecting all professional advisers who work in this area.
The current position is that many legal firms advise family businesses because it is difficult not to; there are just so many of them. In future, a family business service will not feature in the strategy of every firm; some will focus on listed companies, or on sectors where family ownership is less abundant, like tech startups, or they will continue the conventional, organisational division between corporate and private client work.
These are strategic choices, and like every other sector, the prize in the family business sector will be won by firms who invest in training staff and developing new market leading services. These firms will also lead the way in creating multi-disciplinary practices that cater for the broad needs of these clients. Such practices will comprise a group of advisers from different professions of origin who have learned how to understand the needs of family businesses.
FFI’s vision is to Educate, Connect, and Inspire. It is the most influential global network of thought-leaders in this field and should be the organisation of choice for lawyers who want to advise family business clients.
Ken McCracken is a family enterprise consultant. He is a Fellow of the Family Firm Institute and a member of its board of directors.
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