With only about 20 per cent of UK family businesses making it to third generation, the Wates Group is now fourth generation. What is the key to making succession planning work? What have been the challenges and lessons learned?
Good luck has certainly played its part along the way. However, one thing that I believe is fundamental to the success and continuation of Wates Group is the passion which the family has always had for the business and continues to have to this day.
When considering the next generation the philosophy has always been to only pass ownership to those who were interested, genuinely, in the business. We’ve been able to do this by being a good business, profitable and with positive investments. We have always offered a fair deal for those children or inheritors who didn’t want to be involved. Running a tightly owned business with committed, engaged family members has been key to success and longevity.
The family has also had the good fortune to have interested, talented and motivated next generations to hand over to. We have a tradition of large families, and for that we are grateful. In the next generation we have some who are very interested and gaining a passion for the business. That is fantastic to see, and I hope that they will have the chance to flourish in the business, and find it rewarding and motivational.
For those who aren’t interested, there is no pressure on them. We try to make it fair, if not equal, in the way they are compensated if not keen to be involved.
As a business set up in 1897 what has been the key to success for 120 years?
I believe, quite simply, we have had to be a good business to survive. Good in the sense that it is well run, but also in the sense that we operate in a sector which is in demand and resilient. We also believe that it is very important to be ‘good’ in the way we approach working with our communities and business partners, and understand the longstanding beneficial relationship.
Over 120 years’ of business the Wates Group has stuck to, and been passionate about, its sector – the built environment. It is a strong sector with longevity. It doesn’t get destroyed or usurped completely by technology. It is also very UK oriented, which has given us a strong focus for growth.
Is a family business considered more of a strength in negotiations with partners, investors, suppliers or a potential risk?
I think it is fair to say that it is a bit of a mix, but usually reputation and experience speak for themselves. Some suggest that family businesses have more committed and reliable leaders, and some suggest that they are less professional.
In the end I think it balances out, but the proof has to be in what you have achieved and delivered, and reflected in how you are measured by those you are negotiating with. At Wates we have worked hard to find the right balance between retaining the values and ethos of four generations of family ownership, with the governance and rigour of a professional executive.
Family politics can prove challenging at the best of times. What advice would you give to others in managing this from your experience at the Wates Group?
I think that John L Ward, the famous business academic coins it best, likening family businesses to ‘gardens’. They need continual maintenance in order to flourish and bloom.
There is a common cause in a family business, and if problems, like weeds, break out then they need to be dealt with, dug up and not let to overgrow. ‘Dig it up, or tend to it; don’t just ignore it’ is the approach that we take as a business.
When looking to the next generation you have to make sure that those who are handing the baton, or trowel, on to are capable of operating and flourishing within the family business dynamic.
At the end of the day, it is all about a common cause and you all have to work really hard to deliver that. Communication is fundamental in making it a success.
It is not all roses and flowers, but the garden can be a great place to be much of the time.
You worked in the City before joining the family business. Would you encourage the next generation of family business owners to think about other careers to provide more experience?
Ultimately we would like our children and family members to flourish, find what is best for them and gain self-confidence. What we believe works best for the generations coming through is to gain experience, knowledge and insight elsewhere. Also, somewhere that doesn’t have the same family name. That is something we believe is in our children’s best interests, but also brings opportunities and new vision and experience to the firm.
Whatever their experience we can bring them in and train them up and show them how we do business. We will absolutely value the skills they bring and try our best to find the right part of the business for them so they can flourish and innovate in that role.
We don’t have rigid rules about the path that they take into the business, we need to be flexible. We have guiding principles, and we hope that these will bring about the best for the next and future generations to come.
In a family business going back generations, the commitment to a more diverse workforce and certainly leadership team may be more difficult to achieve. How do you look to address this at Wates’ Group?
Well, biology has played its part. In previous generations of Wates’ it was very male dominated. Couple that with restrictions on women being shareholders in the founding generations, and our diversity was almost non-existent.
However, and this is a very positive thing for the business, there are a lot more women in the next generation. We do have a way to go in terms of a more gender diverse ownership, but there is no doubt that this will come in the next generation, and I am delighted to say that.
As an organisation, Wates is committed to improving diversity and inclusion, and we have senior female representation at both Group Board and Executive Committee level. However, we, as with other companies throughout the sector suffer from a lack of diversity, which we have to address to ensure the long-term sustainability of our industry. We are working hard to do this in our business, and with partners in the industry.
Family business makes up 87 per cent of all private sector businesses in the UK and therefore have a good collective overview of the political, economic and social landscape. What do you believe are the biggest challenges and biggest opportunities for UK business in the next 5-10 years?
The key challenge currently, and for the immediate to medium term future, is Brexit. It is, to us, a real concern. As a business we were publicly not in favour of it, but we now have accepted it as reality and we are ensuring that we have the processes and measures in place to provide resilience going forward.
There will be challenges, few are denying that, but what is absolutely critical is how government approaches it. It is vital that government remembers business and its fundamental significance. Business in this country, be it privately, publicly, family or employee owned, is at the heartbeat and drives the economy. Business voices need to be heard across markets and regions.
Sustainability is real and a major issue of focus. Climate change, population movement and population growth are huge factors that will provide businesses, political organisations, not-for-profits and others with significant challenges, but also some very real and positive opportunities.
Finally for business, as in most areas of life, technology is having more of an impact than almost anything else. It is moving so quickly and changing the goal posts continually. However, this absolutely brings with it new and equally exciting and mind-boggling challenges and opportunities along the way.
Dynamism and diversification are seen by many as key to business survival. Is this easier or harder to achieve for family business?
No matter what your business ownership model, dynamism is always important for survival. Sometimes this can be harder for family businesses to achieve. Without access to stock market capital for new projects, a family business has to be much better at self-generating income. This can be a hugely positive incentive to encourage dynamism and ability to support that income generation. However, it can sometimes create a situation where a business just bobbles along, enough to survive into the next generation, but not to flourish. The best family businesses are some of the most dynamic organisations out there and demonstrate across many sectors how successful they can be.
In your experience do you believe that other business models in UK can learn lessons from family businesses?
There are some key things that I have learnt in my career in a family business that I believe can also be important for other ownership models.
Firstly, there is a greater emphasis on taking a medium to long term view, looking ahead to the next generation and how to create longevity. We have a greater emphasis on creating more patient capital.
Secondly, another observation is the way in which family businesses embed themselves in industries and localities. With a far greater presence in trade organisations and business groups, they tend to push forward a whole range of issues fundamental to building links between business and communities.
I think these are areas that large businesses could learn and benefit from.
Sustainability of communities large and small – this shines through the Group’s business model, but also its charitable work. Why is this so important? How has this evolved?
We have a very strong feeling in our family that good business is good for society. We truly believe that. Family business, when run well, is an extremely important thread in the rich tapestry of UK life.
When you look at the topic of sustainability today it is a licence to operate. You cannot be a large business in our, or many other industries, without a proper and professional corporate approach to sustainability.
It is not a topic or way of operating that is new to Wates, however. We have a long history of sustainability and philanthropy within the company. My grandfather and great uncles built entire university buildings, giving millions of pounds to their local communities.
We continue the tradition of philanthropy today and it remains a core part of the company’s values. The Wates’ corporate foundation has provided approximately £12million to charitable causes over the past 8-10 years, and much of that focused in the communities where we and our staff operate and live. We look at it as a privilege to be able to support large and small projects through donations, match funding and pay as you earn.
Sustainability is clearly endemic throughout the whole business. We believe we are doing it well, but we do know there are areas in which we ‘could do better’. We pay a lot of attention to this, look at how our competitors and others are doing. It is a very real and ongoing focus for the business.
Are there are other family businesses that you particularly admire? If so, who are they and what is it you admire most?
There are a couple of examples in the UK. Firstly, Warburtons, the bakers. It is apparent through all areas of the business the strength of family values, and how this has remained not only part of the brand, but at the heart of operations. It operates in a very tough market, but the family maintains a high level of investment in their bakeries, staff and brand innovation.
The other is Pentland, the name behind many world class sports, outdoor and fashion clothing brands. As a third generation business, they remain committed to family values, continue to innovate, grow and invest wisely.
Internationally there is one example that really sticks out to me – Ayala, based in the Philippines. Formed 180 years ago, it has succeeded through seven generations. With market capitalisation it accounts for almost 20% of the Philippine Stock Exchange. Fundamental to its success is good harmonious family governance, which combines huge business success with a firm commitment to social responsibility through the Ayala Foundation.