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New family business demographic coined in new research

By Michael Finnigan

Family businesses are mirroring changes in society in “blended family businesses”, according to a new report released by UK-based Families in Business, which include any family firm that has invited members of a second family into senior positions.

Dani Saveker, CEO of the consultancy and research company, who coined the term, believes they will become increasingly important over the coming years.

According to Saveker, the number of blended family businesses are on the rise, but they suffer from a unique set of problems that are likely to become the focus of future research as patriarchs and matriarchs continue to get divorces and look for love in later life.

The research was conducted as a part of the firm's annual survey, which explores current trends in the family business world.

“We've seen a great deal of change in the way that families operate over the last 100 years and your typical 2.4 children and a dog is no longer the norm,” Saveker said. “Over the last few years we've seen an increasing number of family firms with blended families and they're subject to an extra layer of family dynamics that are largely unknown and difficult to manage.”

According to Saveker, the number of requests for advice from blended families businesses has increased in 2014. She says particular areas of concern are disagreements that arise from conflicting loyalties and feelings of inequality.

Saveker says that stepchildren also often complain about feeling like second-class citizens who are not as important as biological children.

Well-known blended family businesses include Rupert Murdoch's News Corporation, which according to media reports is the subject of a disagreement between first and second families, who are unhappy with terms of a family trust that does not give children from second wife Wendi Deng voting rights in the business. The two girls, who are still only children, will only have ownership shares in News Corp, unlike Murdoch's children from his previous marriage.

In Japan, blended family businesses are the norm with many wealthy business owners adopting their daughter's husbands in order to continue the family name. The current chairman of car manufacturer Suzuki is the fourth adopted son in a row at the company.

Saveker says that blended family businesses are not all bad and many stepchildren often provide a unique perspective on the firm.

“The problem of blended family businesses is that the elephant is in the room straight away, unlike in traditional family firms where issues are swept under the carpet. The good news is that these problems can be managed and I expect that we will see increasing research on these topics in future,” Saveker said.

Other results from the survey found that over 70% of family businesses have no formal succession plans, with just 5% having a formal plan in place, and 22% admitting they don't believe one is necessary.

The survey also found that over 70% of family businesses have no formal succession plans, and 22% admitting they don't believe one is necessary.

Saveker also found that whilst many more women are entering their family's business, the dominant leader remains male with 84% as the most senior executive.

“So many family businesses in the UK were called 'so and so & Sons', which dictated who would be invited into the business,” Saveker said. “But that mentality is slowly changing and I think that women have aspirations and rightly so to go into the business.”

Prominent female leaders of UK family businesses include Audrey Baxter of the eponymous Scottish food business, and retailer Wilkinson's, which is led by Lisa Wilkinson. 

The survey also explored how family firms viewed their professional advisers, with the majority ranking accountants as the best performing professional advisers, which according to Saveker is because they usually represent the longest running relationships.

Incentivising non-family executives in the business was also shown as a continuing problem for the majority of family businesses, with the survey highlighting that 92% of shares are held by the family.

Family businesses from across the UK took part in the survey, representing all industries and market sectors and ranging from second to tenth generation firms. The average turnover of the 200 firms was £25 million.