Carol Leonard, Managing Partner The Inzito Partnership / AltoPartners UK, says there’s a long and respected history of family-owned businesses in the country.

Over the course of that history, she says, there have been some changes in how these companies manage their capital and growth. “There’s been a flight of capital from public companies to private equity, allowing family businesses to stay in private hands or have substantial private shareholdings. While not all these privately-owned companies are owned by families, there are many family-owned businesses which still have substantial private shareholdings.”

Leonard has worked with a number of family-owned businesses in the various regions of the UK, and in branches the companies might have in Canada or the Netherlands, for example. That work has included finding CEOS or managing directors, who might be the first outside professional hired by a family-owned company. She’s also worked with boards, helping them to beef up their governance. That external CEO might be someone whose role is to “keep the seat warm” for five or ten years, while a son or daughter gets ready to take over the reins. It’s also possible that the next generation simply isn’t interested in working for the family firm.

It’s these intricacies and challenges that are fascinating, Leonard says. “I’m very respectful of family businesses. I think they work incredibly well most of the time. It’s very, very helpful to have all of your shareholders around the table as a family. And they’re usually very nice people, quite quirky and individual. It’s true they might be there by birthright rather than merit, but actually often the calibre of the people is really good.”

“The culture of the company is important. It seems that if a company has lasted down many generations, they’ve often been brought up to understand that they have to pass it on. Therefore they’re not too greedy. Some family members establish successful careers elsewhere. It is important that the next generations don’t feel necessarily obliged to work in it, that they have the freedom to choose to be a school teacher or a soldier or a truck driver or whatever they want to do.”

Based on her experience, Leonard says the following are important in making sure succession goes smoothly:

• planning ahead – a company needs a road map: Is the next generation interested? What are the age gaps? Who’s got potential?

• seeking advice from experienced professionals - access the best possible senior advisors as you can.

• evaluating potential successors objectively – and ensure that they get the mentoring and education they need

Family members who work in the family-owned business should gain external work experience before joining the family business (an executive search consultant can help with that process).

Leonard also emphasises the role of the board in succession planning, particularly the importance of the chair and the Remuneration Committee (Remco) chair. These individuals play a crucial role in mentoring and supporting new family members taking on leadership roles within the company.

Being honest about a family member’s interest and suitability for the business is essential, she says: “Everyone involved has to be really curious and open about where a potential successor might have shortcomings. And everyone has to put in the work to fill those gaps.”

Carol Leonard, Managing Partner The Inzito Partnership / AltoPartners UK and AltoPartners Global Operating Committee Member

READ AltoPartners White Paper on succession planning in family-owned businesses