A different approach

Tuesday, 01 February 2011
The origins, activities and aims of the STEP Business Families special interest group.

John Freeman of Families in Business summed up the reason for establishing the STEP Business Families Group in one of the first seminars that we held. ‘Once he or she moves beyond providing purely legal or accounting advice to family businesses, the adviser is entering uncharted territory, because of the interaction of business, family dynamics and money that drive those businesses’. Most private client practitioners will have family businesses as clients at some point during their careers, but as John implied, their training will tend to push them towards a particular approach: there has to be a legal solution to a particular issue, or alternatively, it’s all in the numbers. With experience, practitioners will realise that family businesses demand a rather different approach, requiring them to have regard to human as well as business issues; it was to create an awareness of what is needed to provide the best possible advice, and to provide education in this broader approach that the STEP Business Families Group was formed.

The Group has been in existence for just over three years. The STEP Spring Conference in 2007 focused on a wide variety of private client issues, but with a main theme of family businesses. Following that conference, STEP CEO David Harvey, who has a strong interest in family businesses, took soundings from those attending about the feasibility of developing a special interest group.

There were sufficient responses to go on to the next step, which was the establishment of a steering group. The first task for the Group was to give itself a name. The original concept had been to provide a forum for STEP members providing advice on family businesses, this being the way in which most would regard their clients. But during the course of discussions, it was recognised that the issues arising from family businesses were far more limited than those relating to business families. In advising a family business, the standard approach has been to deal with tax and corporate matters, as Mr Freeman noted, but advising a business family can be a far broader remit, encompassing as it does such matters as balancing the interests of family members working in a business with those of family members who are not. Questions of compensation arise. The decision was taken at a very early stage that events put on by the Group would emphasise the breadth of approach, and we have been very fortunate in the contributions made by individuals involved in family businesses, and family business practitioners outside the routine scope of law and accountancy.

Our inaugural event, in October 2007, was entitled ‘The Family Business Dynamic’. David Harvey laid down a marker for the future progress of the group by explaining the need for STEP to have a business family specialisation, drawing together a number of concurrent threads in the way in which we provide advice. The first member of a family business to speak to us, Martin Stepek, CEO of The Scottish Family Business Association, gave an absorbing talk on why his own family business had failed, and how tensions in the intra-family relationships had contributed to this. He emphasised the importance of having members of a business family all pulling together, and how easily a business can unravel when those working within it are more occupied with jockeying for position with colleagues than driving the business forward. This was an ideal introduction to the type of issue that business families face; their lawyers and accountants can be of the highest possible calibre, but if the human side of the family is neglected, the business can still run into problems.

A constant factor in Group events has been the openness that speakers from business families have shown in taking us behind the scenes of their businesses, explaining the interaction between business decisions and family relationships, and how they have resolved the problems that can arise. Alex Scott of Sand Aire and Bella Hopewell of C Hoare & Co spoke to us last summer about the way in which each of them had become involved in their respective family businesses. Alex was a member of the fifth generation of his family to be involved in the family business, an insurance company. He was identified by his family as the person most suited to take over the leadership of the company; when he did so, his first action was to review the company’s position in the marketplace, with a view to deciding how to take the company forward. The reluctant conclusion was that the best thing for the family as a whole would be for the company to be sold, and so within a very short space of time, Alex had assumed leadership, and then sold the company. He explained the process by which the family had then established a family office to look after the proceeds of the sale, and how this had moved to act for a number of other families, thus creating a successful family business.

Bella Hopewell is a member of the Hoare family, the owners of C Hoare & Co bank. Only members of the family are permitted to be partners, but Bella pointed out that if this had been the sole criterion for partnership, it would be most unlikely that the bank would have lasted as long as it has. Perhaps surprisingly for a business that has been going for over 300 years, a data bank is maintained of all the family members, and their professional and practical skills sets, so that when a vacancy occurs, the appropriate person to fill it can easily be identified; there are currently over 1,000 names on it. But in addition to this, there is a rule that no siblings are employed, to avoid potential rivalries. Overall, what appears to be a somewhat archaic way of identifying those to take the bank forward is, in fact, as sophisticated as any other modern technique.

A number of our speakers, including Grant Gordon of the Institute for Family Business and Peter Leech of Peter Leech Associates, have demonstrated the identifiable set of skills and techniques that are required in providing advice to families. We actually saw this in action, when Ann Ridgeon of Ridgeon Group, a member of the fourth generation of her family to be involved in a group of companies dealing with supply of timber and building materials throughout the UK shared a platform with Ken McCracken from Family Business Solutions Limited, and talked us through the way in which, at key points in the development of the company, specialist advice had been absolutely essential. There was a silence at the end of the presentation, when some of London’s most highflying solicitors and accountants realised that they were not able to provide all the answers!

The Group has not only dealt with the planning aspects of advice to business families, but also how to deal with problems when they arise. Ian Marsh of Family Dispute Resolution and Toby Graham of Farrer & Co debated how family disputes can be dealt with through mediation, and when litigation is the only solution. At the same event, Mark Harper of Withers explained how matrimonial proceedings can impact on family businesses, and what steps can be taken to prevent matrimonial break-up causing the break-up of the family business.

One of the major achievements has been the production of a book, Business Families and Family Businesses. The two vice-chairs of the steering group, and editors of the book, Ian MacDonald and John Sutton, deserve tremendous praise for identifying, corralling and cajoling authors who covered a wide-variety of issues that practitioners will come across and dealt with them all in a clear way. The book is now acknowledged as an essential tool for any business family practitioner, and the fact that at the time of writing, it stands at 1,154,070 in the Amazon rankings should be considered as more of a reflection of its small print run than of its quality. Indeed, so favourable has been the reaction that the publishers are now looking to the possibility of there being a second edition, but with this being multi-jurisdictional in approach.

The formal launch of the Group to STEP took place at the Chairman’s Conference in early December 2010. The opportunity was taken to discuss how best to move the Group forward internationally, and the decision was taken to establish informal links with STEP branches worldwide, to exchange information, and compare notes on issues arising. Progress will be reviewed at the Chairman’s conference later this year, the aim being to establish a more formal link up in due course. Discussions are also taking place to establish a STEP Business Families qualification.

In a relatively short period, attendance at Group events has grown considerably, and it is encouraging that non STEP members are attending in ever greater numbers, emphasising the wide scope of specialisms required to advise business families.

No report on the development of the Group would be complete without recognising the enormous contribution of David Harvey. The creation of the Group was David’s idea in the first place, and he has been instrumental in planning its activities and moving it forward. Many thanks to him.

For more information on the STEP Business Families special interest group and to read articles, news and research in this area go to www.step.org/business-families

If you are interested in joining the Business Families special interest group just send an email confirming that you would like to join to [email protected]

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Chris Lintott

 Chris Lintott TEP is a Partner at Penningtons and Chairman of the STEP Business Families special interest group.

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