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Growing family businesses face next gen conundrum says Top 75 report

By James Beech

More than 80% of the world’s most up and coming family businesses have their second generation or later on board, but families face a “conundrum” with their next gens over ownership versus management.

The Top 75 Fastest Growing Mid-Sized Family Businesses, the new report by Campden Research with KKR out this week, spotlighted the widening gap between ownership and leadership as businesses passed from founding to successive generations. The need to find “room” for later generations was expressed by all principles interviewed for the Top 75 report—having appropriate governance structures in place (26%), having independent non-executive directors (19%) and having appropriate charters (4%) were described as some of the most important governance challenges for families.

“As you come down the lines towards generation three and four, there won’t be room in the business for everyone to work there,” Mairi Mickel (pictured), a fourth-gen family business member and accredited family adviser, said in the Top 75 report.

“Some will only be owners and some will have to settle for other roles and that may not be easy to accept.”

The report said clearly defined charters that set out the family constitution or mission statement, and the role of people who marry into the family “will help to instil order”.

A family governance structure which included a “clearly defined, written down succession plan” and an “exit strategy” for senior family members was recommended.

Among the next generation of family members, 29% of family offices surveyed by The Global Family Office Report 2018, released by Campden Research in September, now held management or executive roles, while 23% sat on the board. However, half of all family offices did not have a succession plan in place. There had only been a one percentage point increase in succession plans since The Global Family Office Report warned of the looming issue in 2017.

Elsewhere in the Top 75 report, the top 10 family businesses all declared three year growth of more than 20%. Retail, consumer goods, and lifestyle (27%), agriculture, food, and beverage (20%), and manufacturing (20%) were the most common industries growing families were working in.

Most of the firms surveyed (51%) had expanded into four, five or six regions around the world to form a global footprint. The 25 oldest family businesses all emanated from Europe, with an average longevity of 101 years. However, North America accounted for a significant 75% of all business activity despite having less than a quarter (22%) of business headquartered there.