Do Family Businesses Suit Today’s Environment in UK?

Overview

Family-run businesses are those in which more than half of the stakes are in the hands of the people of the same family. Family businesses derive many benefits as compared to other forms of business. Some of the benefits of family businesses are flexibility and the development of trust among the personnel. However, failure to develop good leadership can lead to problems associated with communication and overpay. The paper looks at the merits of running family businesses. Challenges associated with family businesses are also explored in the paper. The opportunities for growth and improvement in the family business industry are analysed and explored substantially.

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Family businesses in the UK

Recent research gives interesting insight as far as family-owned businesses in the UK are concerned. The role played by family businesses in the UK economy has been estimated to be great indeed. Family businesses in the UK are of much importance to the economy, though they are often not given the support and attention they deserve. Studies, therefore, indicate that there are more family-owned businesses in Scotland than in England. The UK trails other European countries as far as the presence of family businesses is concerned. Countries with great numbers of family-owned businesses include Germany and France. Most of the family-owned companies have not been in existence for a long time. In the family business industry, the rate of women taking up entrepreneurial initiatives is higher in the UK than in other G8 countries. Ethnicity also features greatly in the statistics of family-owned businesses. Studies indicate that majority of the ethnic minority firms are owned by families and that the minorities are the chief entrepreneurs (Barrett & Moores 2002). Only a small percentage (16%) of small family companies has been operated by the same family for more than two generations. The majority of the family entrepreneurs however have no plans for succession (Avery 2003).

The research highlights the importance of the significance of family-owned businesses. In fact, the role played by the companies is so great that the government needs to consider its policy towards the sector. The families owned businesses in the UK have never gotten the attention they deserve. The government has for long considered them as a non-entity. However recent studies affirm the crucial role they play in the economy at large. As far as employment creation is concerned these family-owned companies offer solutions to the ever-expanding job seekers. The UK family business sector consequently has a lot of potential for expansion and better performance. The government must take the studies seriously and alter its approach to the industry. The policymakers ought to shift focus from the ordinary parameters to the role played by family businesses. Both in the UK and the region at large, the significance of family-owned business is beyond comprehension.

The continued negligence policy of the government has however hurt the progress of the sector. Family-owned businesses face a lot of challenges some of which can be addressed through policy changes. The government should come up with legislation that will punish those family-owned companies that don’t follow the law. Since family-owned companies play a crucial role in the generation of employment and government revenue the government should support them in all aspects. They play the role of supporting the key parameters of the economy. Their failure in this sector can mean the failure of the economy at large (Colli 2003).

The family business sector in the UK however faces many challenges in its operations. The aspect of future ownership of the firms poses a huge risk. The businesses lack a concrete future ownership plan which causes an aspect of uncertainty which is not good for businesses. The majority of the companies owned by families don’t have succession plans. Therefore, managing change has become the most common challenge facing the industry. Family-owned companies have always failed to implement efficient change management policies. Talent management is another crucial challenge facing the fate of family-owned businesses in the UK. Most of the family-owned businesses have minimum or no personnel. There is a huge risk as far as the development of talent is concerned. Some of them are single man shows where the entrepreneur is the only worker in the business.

Family businesses perform badly due to a lack of credibility in their methods of operation. The units are run traditionally without the inclusion of modern models of management and efficiency (Nicholson & Gordon 2008).

Various surveys have also indicated that the family business units in the UK are plagued by another set of challenges. For instance, recruitment is a crucial component of any vibrant organization. It is through recruitment that companies get the best people in the businesses. Any slight mistake in the process of recruitment offers a huge danger for the company since the quality of personnel determines the future and success of any organization. The process of recruitment has been done unprofessionally in ways that have compromised the selection of employees in family-owned businesses. The preference of close family members and friends has led to the admission of incompetent people in the organization.

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There have also been cases in which these companies appoint loyalists to key positions in the company. This has compromised performance and given efficiency the back seat making family-owned businesses unproductive and unattractive. Tax planning and remuneration are the other challenges that have since plagued the family-owned sector. Family-owned companies have shown poor tax planning techniques in the recent past. Remuneration for its employees has also been an issue of concern. Most family-owned businesses are meant to generate income for the family thus little attention has been given to the remuneration and compensation of the management and employees. Modern practices call for proper remuneration and compensation of the employees to motivate them and spur the growth of the organization (Arthur 1999).

Viability of Family-Owned Businesses in the UK

The family business sector in the UK has a lot of potentials as far as viability is concerned. Various factors indicate that family-owned businesses play a crucial role in the economy and the entire business environment. Since the past, the sector has been growing gradually as its role expands, furthermore the continued support from the policymakers has given the sector a boost despite the challenges it currently faces. The prospects of the family-owned businesses sector can be measured against the following aspects:

  • Wider contribution to the economy
  • Breeding ground
  • Contribution to tax revenues
  • Performance
  • Business environment

Wider Contribution to the Economy

The contribution goes beyond the output generated and the number of jobs created. The family-owned sector appears to be the place where the major entrepreneurial activity starts from. It serves as a point of beginning as well as a point of reference for the entire business activities of the economy (Kaslow 2006).

Breeding Ground

Family businesses offer the best breeding ground and start-up points for entrepreneurship. Major corporate giants in the UK and Europe began as family units. The prospects of the whole sector stand vibrant as long as the spirit of entrepreneurship is kept high (Bose et al 2003).

Contribution to Tax and Revenues

Family-owned businesses generate income for the government through payment of taxes which adds up to the revenue which the government utilises to fund its programs and development projects. This also points towards the great importance of the sector in the whole industry. This makes the sector obtain the much-needed attention of the policymakers who are crucial in its future endeavours (Morrison et al 2004).

Performance

The performance of the family-owned businesses sometimes outshines that of other entities due to a number of factors. The loyalty of the members of the organizations is one of the key reasons behind the success of family-owned businesses over other firms (Poutziouris 2006)

Business Environment

The policy environment in the UK has been relatively supportive in recent years. This has made the business firms owned by families derive better facilities and do better. With the increasing importance and significance of family businesses in the entire economy, the policymakers have no alternative but to support the sector. There are therefore better prospects in the future basing on the support of the policymakers (Goethals 2004).

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Cases

World Transport Agency Limited

World transport agency limited is a family-owned business that has been successful in business since its inception in 1913. The company deals in the giving of value to importers via a number of services and products in the transport sector. The company specializes in the provision of customized services to its customers. The company operates in six different regions: the USA, UK, and Hong Kong. Each section is manned by a director who entirely runs the operations. Most of the company’s directors are highly experienced; some of them have more than 20 years of working experience in the company.

Due to this kind of structure the company’s decision-making function is highly fast and effective. The company has been dealing with freight forwarding for a long time now. Due to its vast experience in the area, it has since graduated to freight management. It is therefore leading in this area due to its attribute of customized products. The management of freight gives an n opportunity to combine the entire operation. Mutual agreement between the company and the customers has been in practice since the past. This has made the entire process smooth and effective. The company gets its earnings through the recovery of service fees. As a result, the company is not dependant on rebates and kickbacks. This has given the company independence in its operations as well as giving efficiency and flexibility to its customers.

The company’s products and performance have attracted various awards which indicate the success of the company. The British International Freight Association has granted the company many awards in its lifetime. Other awards have come from the UK government, for instance, the UK government initiative. The best family business award was awarded to the company by the Coutts bank. The company carries out its activities in small teams so as to handle its customers in a dedicated manner. Training is a continuous aspect of the company’s program so as to equip its personnel for the service. Every team in the company is assigned a manager who oversees the programs and activities of the group. The title given to the team leaders is commercial managers who are obligated to the overall excellence of the team. The team leaders are accountable to the directors of local operations in the three respective regions. The company has continually been investing in the systems to remain effective in all aspects.

This has borne fruits for the company which now boasts of leadership in the entire provision of technical solutions. The range of services provided by the company is wide in nature. These include; financial analysis, performance analysis, order management, and freight calculations. Customers are very much involved in the entire program (Davidson & Fielden, 2009).

The company is a founding member of the certified transportation network which is an international organization of companies in the same line. The network includes professional and rich forwarders selected because of their status in their areas of operation. The company endeavours to cultivate a long-term quality relationship with the customers through the provision of quality customized products and services. It is also the company’s plan to continually improve its service and product quality for the benefit of its own prospects and those of its customers. All these are to be realized via the investment and development of resources efficiently and continuously. The company also practices a transparency policy where much of the company’s reports and information are made available at request (Bogod & Leah 1999).

The Kennedy Group

The Kennedy Group is one of the most prominent construction and property development companies in the UK. The Northern Ireland Company has made great strides in the local market as far as market success is concerned. With an experience of 60 years, the company is well conversant with the business environment of both the UK the region at large. The company offers the best mix of products to its customers. This is fundamentally due to its well-developed philosophy of work developed over time. The company’s working philosophy, therefore, is the key driving force behind its success. Team management and teamwork are given due importance in the company due to its nature f diversity. Joint ventures and partnerships have played a great role in the evolution of the company’s service profile and success at large.

The company has put a lot of emphasis on relationship creation and building over the time it has been in operation. This has reaped benefits in many ways echoing the great success the company has made over a long time. Professional management has also been a great pillar of the company’s practical philosophy. This has ensured the effective operation of the company in virtually all aspects. The benefits have superseded the financial income to incorporate the household name character of the company.

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The name Kennedy echoes quality to those who have been in contact with the company. As far s property development is concerned the company is a leader not only in Ireland but also n the entire UK and some parts of the region. The company also indulges in the construction of associated services manufacturing as well as hotel management. As result, the company has a wide range of customers most which are loyal to it due to the efficient service delivery of the company. The policy of professionalism in the company has perfected service delivery which makes it a number one stop for all service-seeking customers (Klein et al 2006, 502). The company deals with the provision of services and products both in the public and private sectors (Fletcher 2002).

Discussion

Family-owned businesses have been a common phenomenon in the UK. Their viability however has been subject to a number of factors. Family-owned businesses are those in which a majority of the shares are owned by people of the same family. The number of companies that have thrived in the UK has been increasing with time. The bottom line is the manner in which the family-owned businesses operate. A lot of challenges plague the industry. For instance, lack of professionalism in business operations has led to great inefficiency among family-owned businesses. Recruitment is one area that has been neglected in streamlining the operations of family-owned businesses. During this process, crucial factors like qualification and experience are ignored as loyalty is rewarded. This leads to inefficiency and failure of the organizations. However, family-owned businesses are performing well in the UK. Their prospects in the future also look good bearing in mind that the policymakers are planning to focus on their needs when making policies.

Conclusion

Family-owned businesses in the UK have been in operation for a long time. Recent research has indicated that the presence of family-owned companies in the UK is great and their role is huge. However, the most important issue is whether family-owned businesses are viable in the UK. The case study presented above indicates the fact that family-owned businesses are viable and therefore thrive well in the UK. The study studied various companies which were owned by families and it was revealed that a majority of the companies are doing well. In fact, our study indicates that in certain areas the family-owned businesses perform better than public companies. Another important finding worth noting is the fact that most big organizations that operate in the UK and outside started as family-owned businesses. This shows the success and viability of the family-owned businesses in the UK both in the present and also in the past. In fact, the majority of the family-owned business has recorded the best performance across the board. The government has however consistently denied the sector the attention it deserves. Actually, the policymakers have neglected the sector for a long time. This negligence has had far-reaching effects on the sector at large. As much as the family-owned business in the UK has many challenges the sector is still promising. The paper has analytically explored the state of the UK family-owned businesses. The future prospects of the sector have also been analysed bearing n mind the whole profession of the industry. It can thus be said that the family-owned business in the UK have better prospects on the condition that the policymakers consider their needs in their economic projections. Continued negligence of the sector will only spell doom for the future. Apart from the role of the government the family-owned companies must come out strongly and overcome the challenges that they face. From lack of professionalism, recruitment decisions, succession plans, and future ownership uncertainty, the family-owned businesses in the UK have a long way to go.

Reference List

Arthur, M., 1999. Frontiers of entrepreneurship research: proceedings of the annual Entrepreneurship Research Conference. Pennsylvania: Pennsylvania State University.

Avery, G., 2003. Leadership for sustainable futures: achieving success in a competitive world. Washington: Edward Edgar Publishing.

Barrett, M. and Moores, K., 2002. Learning family business: paradoxes and pathways. London: Ashgate Publishing Company.

Bogod, T. and Leah, P. 1999. Guide to family business. New York: Kogan Page Publishers.

Bose, G., Arunadha, B.Altinay, E., & Rowntree Foundation, 2003. Family and work in minority ethnic businesses. London: The Policy Press.

Colli, A., 2003. The history of family business, 1850-2000. Cambridge: Cambridge University Press.

Davidson, M. and Fielden, S., 2009. International handbook of women and small business entrepreneurship. Washington: Edward Elgar Publishing.

Fletcher, D., 2002. Understanding the small family business. Amsterdam: Routledge.

Goethals, G., 2004. Encyclopaedia of Leadership. London: SAGE.

Kaslow, F., 2006. Handbook of family business and family business consultation: a global perspective. Amsterdam: Rotledge.

Klein, H., Smymios, K. & Poutziouris, P. , 2006. Handbook of research on family business. Washington: Edward Elgar.

Morrison, A. Carlsen, J. and Getz, D., 2004. The family business in tourism and hospitality. London: CABI.

Nicholson, N. and Gordon, G., 2008. Family wars: classic conflicts in family business and how to deal with them. New York. Kogan Page Publishers.

Poutziouris, P., 2006. The UK family business PLC economy. London: Institute for Family Business.

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