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The generation game

Running a family business has its challenges, especially when it comes to handing the reins to the next generation

The generation game

According to a report from PwC* only 30 per cent of family businesses survive into a second generation. Handing a company down to your children can be a difficult process and a carefully thought out succession plan is critical.

Succession is a difficult subject and discussions have to be sensitive to the feelings of the whole family. After all, according to the PwC report, 52 per cent of next generation family business leaders were worried that they would need to spend time managing family politics.

One firm that has managed to get succession right is Thatchers – a 100-year-old producer of cider, which has a fourth generation family member currently at the helm. A key ingredient of its success is constant communication between family members, which is made easier because all of the generations live at their Myrtle Farm in Somerset.

Outside experience

Like many successful family firms, Thatchers expects its future leaders to learn every aspect of the business but also to seek new insights and gain expertise through education and by working at other companies.

“As a family there are no set ideas about when is the right time for the next generation to enter the business,” explains Martin, who had already worked in every aspect of the business when he came on board as managing director.

“Knowledge, experience and commitment are the key attributes, and the fifth generation will be encouraged to gain skills and experience in other industry sectors as part of their own apprenticeships.”

Securing longevity

Forward-looking family firms where the next generation is working outside of the business often have a formal process for keeping them up-to-date with company affairs that helps to make the transition seamless when they finally take the reins.

As well as developing skills outside the business, 80 per cent of future leaders surveyed by PwC were attending directors’ meetings long before they were due to have a formal seat on the board, so that they could ‘watch and listen’.

But it’s important for firms to focus on all employees and not just family members. A positive environment that encourages career development for everyone in the company is essential because an engaged and motivated workforce can be the difference between success and failure.

A key concern raised in the PwC survey was the challenge of next generation leaders earning the respect of their colleagues rather than facing hostility around why they were hired in the first place. Joining the business just to ‘make up numbers’ was another concern, with 88 per cent of respondents anxious to leave their mark.

Making their mark

Throughout the history of Thatchers each family member has sought to make their mark by bringing their own niche skills. Stan Thatcher, the son of the company’s founder, developed the style of traditional cider while John Thatcher, Stan’s son, trialled new ways of planting apple trees and putting in place incentives for quality.

Martin now leads the commercial aspects of the company, including securing growth in the UK and overseas. “We have started advertising on TV and have secured major sponsorships with high profile events and festivals such as Glastonbury Festival and the Royal Bath and West Show,” he says. “It’s not easy running a family company – its exceptionally hard work,” he explains.

“But the results are most definitely worth it. It is part of our company values that we run a sustainable business for future generations.” Overall, a successful family succession plan must encourage change and growth but be considerate toward the founding family members.

* Bridging the gap: Handing over the family business to the next generation, PwC, 2014