Well Rounded View
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Family Businesses: A keystone of the Scottish Economy?
Jim Mather MSPHow can we work together to improve survival rates and drive sustainable growth?
“In Conversation” with Jim Mather, MSP, Minister for Enterprise, Energy and Tourism, Scottish Government – Wednesday, November 4th, 2009 Edinburgh
Conducted by Melvyn Ingleson
Q: Minister, if I may ask you first: How important is the Family Business Sector to the Scottish Economy?
A: Melvyn, as you know, the Scottish Family Business Association has done a lot of work in this area. We know that almost 70% of businesses in Scotland are family businesses, accounting for 45% of GDP. Indeed many family owned companies are much bigger than people realise. 41% of the 100 biggest companies are family owned. So yes, the sector is very important not just to the families who own the businesses, but to their employees, whether 2 or 200, to the communities in which those businesses are based and often where family business owners often choose to live. Buts it’s also important to the Scottish economy as a whole and we all need to be aware of both the challenges and opportunities that the sector is dealing with.
www.sfba.co.uk/
Q: Do you think that everyone is aware of the importance of the Family Business Sector to the Scottish Economy?
A: Intrinsically I think most of us know how important the sector is not just the national picture but also the vital contribution that family businesses make to the local business environment. However it’s important to continually raise the profile of family businesses and encourage a debate. Certainly the Federation of Small Business, the Institute of Directors, the Scottish Chambers of Commerce, all are playing their part, as are the many members of the Law Society and the accounting profession. And indeed all recognise that there is something in it for their members, or a client, which is the best way of maintaining support from a range of parties.
Indeed within remote and rural communities we hope to encourage particular impetus. Family businesses, and other forms of locally owned businesses, including social enterprises, have a huge role to play in sustaining communities. Broadband penetration is increasing, transport links are improving, there is great opportunity for local development of renewable energy sources, and the Government remains committed to improving access to Social Housing. All these trends are attracting more and more people to remain within previously remote locations and we need a strong core of locally focused businesses supporting and benefitting from the community.
Q: Are there particular characteristics that you think particularly define the family business?
A: Clearly there is the obvious fact that such businesses are developed and run by family members, often multiple generations. However I think family businesses have a particular eye to the local community, and take a longer term view on sustaining the enterprise, often for reason of family pride. When the average length of trading of a company is now around 10-15 years then family businesses have a huge contribution to make to sustaining economic growth in Scotland. However we know that there is also a high failure rate for family businesses, and we need to recognise some of the unique challenges around succession planning, the development of next generation leaders etc. We can learn much from successful family businesses in Scotland, and elsewhere.
Q: Minister, We touched on the need to improve survival rates for the family business sector. Do you have any particular thoughts on how we achieve that?
A: I think collaboration is key, Melvyn. I have run 130 sessions over the last two years listening to industrial/commercial sectors and communities and mapping their responses. As a result, I am convinced that there are more opportunities for working together than ever before. By bringing together local businesses we can generate cross trading opportunities, but by involving the local authorities, the regulators and the economic development agencies we can focus energy collectively on what matters! We all know that long term the private sector is key to growing an economy. We also know that around 70% of family businesses disappear at the time of succession, particularly between first to second generation. So we have to work harder to help family enterprises succeed either by transferring leadership or by encouraging new forms of business structures to emerge that will maintain the ethos and values of the founders, especially the linkages to local communities and employees.
Q: Do you think, Minister, that there is an opportunity to further align existing publicly funded resources to better support Scottish business?
A: It’s absolutely clear that we cannot leave business growth solely to the economic development agencies. We have to involve a range of other agencies as well as the businesses themselves. In particular we need to recognise the importance of the local authorities who now have a very real responsibility for local economic development, and for nurturing smaller businesses through Business Gateway. We need to recognise for example the importance of considering planning, or licensing issues, early in development of initiatives by business. And we all need to be committed to achieving a higher business birth rate in Scotland and improving the survivability of business of any type, including family businesses. I am particularly taken by the work of the Sirolli Institute in this regard.
http://www.sirolli.com/
I want us to “keep the local pound local” and at local level we must look at joint ventures, cost sharing, whatever it takes to develop both sustainable communities and businesses.
Q: You refer particularly to local authorities, and their expanding role, would you care to expand further?
Pre 2007 Local authorities had no particular role in economic development, especially the support of small firms, and most of the responsibility lies with the enterprise network. As this Government has worked hard with its partners to align resources over £200 million has been directed towards economic development though the local authorities, with additional support coming in via Skills Development Scotland, the enterprise network and the Education and Lifelong Learning activities including support for Colleges and Universities engaging with businesses, encouraging graduate enterprise etc. In these very tough times it’s important that we manage whatever resources we have ever more carefully. We have been working hard in Argyll & Bute to demonstrate what can be achieved by greater collaboration and have been delighted by the enthusiastic response. We work across sectors to develop a business ecology that can benefit not only the businesses but also residents and visitors.
Q: You mentioned visitors as a key recipient of the increased collaboration. Tourism is clearly benefitting from a weak pound at the moment, how do we build on the short term opportunity that provides?
A: Certainly we have benefitted from both those who have enjoyed “staycations” and from visitors who have enjoyed particular value this year from the Eurozone, Japan and North America. But we must continuously improve our product and our service levels as others around the world compete very hard for the leisure pound. Tourism is recognised as a vital growth sector for Scotland and we are seeing increased collaboration between organisations such as the Scottish Tourism Forum, Visit Scotland and local authorities, many of whom have developed very strong destination brands within the overall Scottish wrapper. We have also benefitted greatly from the, focus on Scotland, achieved though the year of the Homecoming, remembering that there are other parts of the UK which might have expected to benefit from the weak pound. Indeed I think we see an opportunity to build on Homecoming 2009 and to continue to benefit from those Scots or those with Scots connections keen to “come home.” You mentioned the scale of the recent GlobalScot Conference a moment ago and we know that those “coming home” and indeed those highly successful Scots usually located elsewhere in the world are keen not only to visit but also to help Scottish businesses to grow and internationalise their products and services. I would encourage ambitious family businesses who want to develop their businesses internationally be it though any means from mail order to opening an office to talk to Scottish Development International but also to take a look at the GlobalScot website, where there are a huge number of successful Scots all around the world keen to help and to advise.
http://www.globalscot.com/
Q: Minister is there any final advice or encouragement that you would like to give to those family business owners reading this?
A: Certainly the Government, and I as a representative of that Government, are keen to both engage with and celebrate the success of family businesses. I would suggest that a key issue for family businesses it to know when, if possible, to pass the torch to the next generation, and to give then autonomy in running the business. Simon Anholt has written much about maintaining brand equity, whether it is a country, product or service, and as someone who has spent many years building brands and developing reputations, you will have a particular view on Simon’s work, Melvyn. I think we would agree with Simon that Innovation, developing and maintaining a pipeline of new projects is vital, to delivering growth, but you must also know how to sell to successor generations. And Generation Y, keen to take on a leadership role in a family business, is probably best suited to sell to Generation Y. So it’s not about diminishing the achievements of one generation but rather about building on the success of earlier generations. Also Simon’s work sets all of our activities in the context of a nation state, and is very helpful in describing how all of us are competing in a very competitive global market, and how all of us impact the overall reputation of Scotland as a place to live, work or be educated in or do business with.
So if I was to risk one piece of advice it would be to look very hard at ensuring successful succession planning, or to consider alternative forms of business enterprise that will allow continued success.
Jim Mather MSP
Minister for Enterprise, Energy and Tourism - Scottish Government
Jim Mather was in conversation with Melvyn Ingleson, a director of the Centre for Scottish Public Policy and CEO of MJI. They will be developing these key themes over supper in early December with a small number of Tods Murray family business clients, as part of Tods Murray ‘s commitment to increasing collaboration between Government, the professions and the vital family business sector.
View Jim Mather’s biography
View Scottish Government website
View Tods Murray’s Families in Business service
Contact Gordon Cunningham – head of Tods Murray’s Families in Business service