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Are family-owned businesses a good idea?

We speak to a seventh-generation milliner about the company’s experiences.

 24 Aug 2016

Working with your nearest and dearest might sound a hellish prospect to some, but family firms have been the lifeblood of the UK economy for centuries. The UK currently has 4.6 million registered family businesses, generating £1.3tn in turnover a year. Some of the world’s biggest firms are still family run, at least in part; Ikea, Samsung, L’Oréal and Fiat among those with the highest profile.

It’s not always a guaranteed winning path. The saying goes that the first generation creates the business, the second runs the business and the third screws it up.

Succession planning is the big issue that ageing founders put off; according to PwC, around 87 per cent of the firms in the UK that describe themselves as family businesses have apparently failed to make adequate plans for succession or a sale. Internal turf wars, failure to evolve with the times, a loss of the original vision and the uncertainty of life after a charismatic and long-serving founder can be fatal.

As baby-boomer bosses approach retirement in the coming five years, an estimated 420,000 firms are poised to have conversations with the generation below them about succession. But is it a good idea for both the business and the family member considering taking the reins?

Lock & Co: Millinery 

Lock & Co is a Mayfair-based milliner that has passed through the generations a remarkable 10 times. It has changed little since it was founded in 1676, selling headpieces to everyone from the Queen to Frank Sinatra, Pharrell Williams and even the PG Tips chimp.

Roger Stephenson is the current deputy chairman. His family joined seven generations ago as employees of the Lock family in 1805 and became partners shortly after. ‘Heritage is a double-edged sword because although you’re in charge, you feel you’re just a custodian,’ says Stephenson, whose forefather James Benning was the inspiration for Lewis Carroll’s Mad Hatter. ‘You just want to keep it in good shape to pass on to the next generation without cocking it up on your watch.’

Lock & Co is still fully owned by the two families and one of the reasons the business has been successful is the clean financial split agreed at the beginning. Shares are evenly divided between the families and one family can’t buy the other one out so the two sides retain parity.

Turning points

‘My great grandfather bought the freehold of our building in the 1920s,’ Stephenson says of the firm’s prime Mayfair location. ‘We were one of the few people in the area to do that and if we didn’t, we wouldn’t be sat here now.’

When times were rocky in the late 1970s and the company faced closure, Stephenson’s uncle stepped in as managing director. ‘He was a lot more focused on costs and break-even whereas the old guard had a different approach,’ says Stephenson. Bloated supplier relationships and lead times were knocked into shape, helping to shore up Lock & Co’s finances.

Difference in opinion

Stephenson’s father had been in charge during that tricky period, which led to Stephenson leaving the company in his twenties to start his own business. ‘When my father was in the business I felt my loyalties were split because I didn’t always agree with the decisions being taken,’ he says. ‘He was in charge when they were struggling and it was hard for him. This was partly behind my decision to move on. As much as I wanted to support him, I didn’t think he was doing the right thing.’

‘The downside of a family firm is dealing with the old guard,’ says Stephenson who later returned to the company, initially to the board before taking an executive role in 2014. ‘You don’t necessarily want to reinvent the wheel but there’s a lot of pride involved when working with your family.

Next generation

Now, with the company building a cult global following, Stephenson has overseen a major website revamp, keen to avoid Lock & Co resting on its laurels as ‘a dusty old hat shop in St James’s’. He insists he won’t force his two children (currently 17 and 15) into the business. ‘My daughter has done work experience here and loved it but I won’t be pushing them into it,’ he says. ‘I’d strongly advise getting some grounding and experience of other businesses because otherwise it can be stifling.’

This story first appeared in Courier Aug/Sep 2016.