When Jim Walker joined the family business in the early 1960s, Walkers Shortbread had already spread its wings from its home in Aberlour to include shops in Elgin and Grantown, employing more than 100 staff. Today, the firm’s biscuits are exported to more than 60 countries and its workforce swelled from 1,300 to 1,700 this autumn to cope with the Christmas rush.
“I was always interested in joining the business, along with my brother and sister – we all had that tendency,” said Mr Walker, who is joint managing director with his brother Joseph. Along with their sister Marjorie, the siblings were the third generation of the family to join the company, which traces its roots back to 1898.
Now Joseph and Jim’s children hold senior positions within the business, while members of the fifth generation are also cutting their teeth in the bakery during holidays. Joseph’s children Nicky, Richard and Philippa are production director, technical director and brand manager respectively, while Jim’s offspring Jacqui, Bryony and Alastair work in marketing, sales and exports.
“Most people who work all their lives in a family business find it satisfying to see their children coming to work in the company,” explained Mr Walker. “But they don’t get it handed to them on a plate – they’ve got to prove themselves.”
Walkers Shortbread appears to have mastered the tricky business of passing on the running of a family enterprise from one generation to the next. But many of its peers haven’t been so fortunate.
Despite 73% of family business owners wanting to pass on their companies to their children, in 2012 only 12% were handed down to the second generation, while only 7% made it on to the third, according to research. A study by the University of the Highlands and Islands (UHI) and its partners suggested Scotland’s economic output could be boosted by £1.23billion a year if more family businesses survived the transition.
Navigating succession also brings other benefits: the survival rate of family business transfers is 90-96%, compared with 35-50% after five years for start-up companies, UHI found. Figures from accountancy firm PwC highlighted the impact of family businesses, which provide 50% of Scotland’s private sector employment – or nearly one million jobs – and make-up 45% of the nation’s economic output, compared with 25% for the UK as a whole.
Another family business that has been passed successfully from parents to children is Mackie’s of Scotland, an Aberdeenshire farming outfit that is now in its fourth generation and has diversified from ice cream into crisps and chocolate. Until he passed away in June, Maitland Mackie was chairman, while his son Mac is managing director and Maitland’s daughters, Karin and Kirstin, are marketing director and development director.
“Our dad grew up on the farm with my grandfather around in the business, so he knew what it was like to get to a certain stage where you’re not in full control yourself to make all of the decisions that you think will be best for the business,” explained Karin. “So when it came to the situation where he felt my brother Mac couldn’t fully implement his role as managing director with my father still sitting on his shoulder that was when he took a step back from the day-to-day running, which I think can be difficult for people who have built up a business.”
Mac and Karin studied law then business administration, while Kirstin completed a master of arts degree before joining the NHS’s graduate training scheme. “I can only speak for myself but after doing commercial conveyancing, I decided marketing ice cream would be much more fun,” Karin joked.
“We were always surprised all three of us ended up back at the business working together. We each went off to do different things and we all chose to come back.”
Karin thinks being a family business helps when it comes to flexibility and making quick decisions. She also thinks herself and her siblings have inherited an entrepreneurial streak from their father and grandfather.
“It’s going to sound very twee but it’s also about the larger ‘family’,” Karin added. “The average tenure at our company is over 12 years and we’ve got a lot of people who have spent their lives working for the business. I think it adds to the cohesion of the business – people feel part of it.”
Maitland Mackie’s recognition that it was time to step back isn’t universal. Reluctance on the part of parents to stand aside is one of the challenges identified by Martin Stepek, chief executive of the Scottish Family Business Association (SFBA).
“Often the older generation doesn’t want to let go – they’re the classic entrepreneurs who built up the business and became synonymous with the brand name,” he said. “They almost don’t have a persona outside the business. They also enjoy working – they’re not like coal miners who want to retire as soon as they can.
“Sometimes you’re left with what I call ‘Prince Charles Syndrome’ – you have children in their 50s but who still don’t have the top job yet. It’s also about when you retire you’re facing up to the fact that you’re going to die one day and no one likes to think about their own mortality.”
Mr Stepek, who took over the running of radio and television repair business J Stepek from his own father, said children are also sometimes reluctant to tackle succession planning.
“It’s a bit like the ‘Belling the Cat’ fable – everyone agrees it’s a good idea to put a bell around the cat’s neck but no one wants to be the one to do it,” he explained. “It’s the same with family businesses – children don’t want to tell mum and dad they should retire so they can get their job.”
For Bill Dean Jr, managing director at shortbread maker Dean’s of Huntly, the transition came down to the pace of the business.
“Myself and my brother Derek were making decisions faster than my parents as they approached retirement, so that was when it happened,” he said. Helen Dean began making shortbread in her kitchen in 1975 to raise money for Huntly’s pipe band, in which her husband, also Bill, was drum major. Bill Jr and Derek took over in the early 1990s, with Derek leaving to pursue other interests in 2003.
Bill Jr worked as a sheet metal fabricator before joining Dean’s in the 1980s, but he doesn’t want to put pressure on his daughter to follow in his footsteps.
“She’s 25 and is working in our accounts department, but it’s too early for her to decide if she would want to take over the business,” he said. “She’s got to find her own feet first.”
One way in which family businesses can thrive is to bring in professional managers. The Harrison family, who became the Urquharts through marriage, took over clothing firm Johnstons of Elgin from its eponymous founding family in 1920. Chief executive Simon Cotton is the latest in a series of professional managers who have run the business, which was founded in 1797.
“It’s very refreshing to work for a family business because the family takes a long-term view,” he said. “If you have private equity or other investors then they can take a short-term view, but family businesses can be planning for the next 30, 40 or even 200 years.”
While companies like Walkers, Mackie’s, Dean’s and Johnstons have all worked hard to grow their brands, PwC’s research threw up a worrying trend, with only 8% of British family enterprises planning to “expand aggressively” over the next five years, compared with 57% in China and 40% in India and the Middle East.
“We certainly need to be exporting more,” agreed Mr Stepek. “A lot of the focus is on the big markets like Brazil, Russia, India and China, but everybody is targeting them, so perhaps we should also be focusing on countries in Scandinavia, the Baltic or Central Europe that are of a similar size to Scotland and perhaps more sustainable markets in the long-run.”
Claire Seaman, senior lecturer in enterprise and family business at Queen Margaret University in Edinburgh, thinks improving communications so companies can share success stories is one way to help family businesses survive the generate gap.
“Sometimes it’s when the older generation hear their contemporaries beginning to talk about succession that triggers all sorts of discussions,” she said. “There are some great success stories but the difficulty is that families can be quite private and they don’t want to talk about their success with succession because it’s an ongoing process.
“They don’t want to talk about it in public but they tend to be much happier and more comfortable talking about the succession stories that have gone well with their peers. They tell a narrative of succession, so it’s less about the quantitative numbers and more about the narrative of the family members and what each of them did and what measures were put in place along the way.”