Defending the dynasty: Family jewellers

Family businesses are commonplace in the jewellery industry but, while history and experience afford many benefits, working with loved ones can mean dealing with a whole host of issues. High emotions, sibling rivalries, bad business decisions in the form of nepotism over promoting talent, which can lead to a lack of new ideas and subsequent stagnation, and the failure to adequately plan for the future can hasten the decline of any once great dynasty.

“There used to be a saying ‘rags to riches and back again in three generations’, which sums up the problems that can arise with a family business that has not been properly organised,” says Michael Hoare, chief executive of trade body The National Association of Goldsmiths (NAG).

He points out that businesses are set up by entrepreneurs who have the passion to make a business work, but are often succeeded by generations that lack the necessary enthusiasm and management and business skills. Also, a greater number of relatives holding shares and wishing to gain influence and income can lead businesses into troubled waters. “Unless businesses take steps to build in proper structures as they grow, this is a recipe for disaster. But, with proper controls, family businesses can flourish,” says Hoare.

A family affair
When you have poured a life’s work into a business then it’s only natural to want to groom your children to take up the reins once you’ve gone, but you need to ensure that you don’t upset existing staff.

When Jonathan Stoner, managing director of four-store mini chain Phillip Stoner, joined his family business he started at the bench and learned the manufacturing side of the business first. “My father was very fair and I had to start at the bottom, almost as an apprentice, making teas and coffees and earning the respect of everyone that already worked there,” he says.
Family business Beaverbrooks was established in 1919 by the Adlestone family, and has since grown to become one of the country’s largest multiple jewellers. “We’ve worked hard at relationships but it’s not a meritocracy, unlike non-family businesses. While this is the case for 98% of the employees, the company directors are there essentially because they are family members and it’s our birthright,” says managing director Mark Adlestone. “In the past few years we’ve been keen that people only take up that birthright if they’re good enough,” he adds.

Managing relationships between family members and fellow employees is essential. Steff Suter, managing director of jeweller Steffans, which has two stores in Nottinghamshire, has employed his children Ellie and Wes as directors, and has given them clearly defined roles in order to avoid clashes. “I’ve also tried to develop the internet side of the business, so that when I retire they could run separate parts of the business and avoid getting on top of each other,” says Suter.

Brothers Robert and Ben Ogden work alongside their father Glen as directors at the family jewellery business Ogden of Harrogate, and also have their own areas of the business that they focus on. “I think the key is to consult widely with, and give responsibility to, the non-family members of the management team, so that everybody feels ownership,” says Robert Ogden.

Learning the ropes
Developing the skills of your successors prior to handing over the business is essential. Adlestone is mentoring his cousin Daniel Brown, who is a director at Beaverbrooks, to assume greater control of the business in the future so that he can take a more strategic overview of the firm. “When I joined in 1979 there was no structural preparation as such.

I would like to think that I am working more systematically with Daniel to develop his commercial awareness and organisational skills. Looking at my own children, I would recommend them to go into other industries first to seriously cut their teeth and broaden their own commercial awareness.”

F Hinds managing director David Hinds agrees gaining work experience in the industry is essential. “It is vital to work in many aspects of the business and gain a wide experience. You have to earn the respect of those already in the business otherwise resentment could result,” he says.

No to nepotism
Mike McGraw, managing director of business development services provider Development Initiatives, has worked closely with the NAG and says outside experience is important. “If a jeweller goes down the route of passing the business on to a younger member of the family, then they need to think about whether or not their skill set is sufficient to run a business in a modern age. And if it isn’t, how they will get them ready,” he says. “It’s absolutely essential to go out into the industry and gain experience. Children often help out in their parents’ shop from a young age, so they could even go to a non-jewellery sector.”

Hoare says that hiring someone just because they are family isn’t always the wisest move. “Be brutally honest, and if your family are not up to the job, set up the correct structures, step back from the business and get an experienced manager in. There is no place for sentimentality if you want to stay in business,” he says.

Hinds advises looking at the gaps in family members’ skill sets and making your hiring decisions based around that. “You cannot choose your family but you can choose employees. This means you may not have the spread of skill sets that the business really requires amongst the family so it is very important that, if you can, you recruit people to complement the family,” he says.

The key issue for concern is how to hand your business over, when to start planning and what to plan for. The NAG conducted a survey in December when it asked its members about their own exit strategies. If found that 55.2% had a succession plan, while 44% didn’t due to fearing the complexity of the task.

Family fortunes
McGraw advises planning three to five years ahead, dealing with any operational issues, and deciding your exit preference, such as passing the business on to children, selling it as a going concern, effecting a management buyout or selling assets and closing down the business. “The first thing they need to do is ask family members if they want to be a part of the business or not and clarify who would want ownership. And what sort of business they want then becomes important,” he says. “Ltd is preferable in most cases as it encourages good business disciplines and irons out many ambiguities around control and voting issues.”

Problems soon arise when certain members of the family take more active roles in the business, while others go in different directions but still want to have their say in the company’s affairs. “Succession is nearly always the biggest issue that gets mentioned by family businesses, especially as people get divorced, travel and relocate far more now, and it’s perhaps inevitable that not every family member will feel the same responsibility to keep the business flourishing,” says Ogden.

Hinds says buying out non-participating family members is the best course of action. Stoner decided to buy his father out of the business to give him a sense of financial security during retirement. “I had to borrow heavily to do so and when you’re under your own financial pressure, rather than just working at the company as an employee, your work a damn sight harder,” he says.

However, many find it hard to let go of their life’s work. “After 50 years, it is hard to drop everything and give up jewellery, and I wouldn’t want to. So I now take an active interest but not a controlling interest in the business,” says Glen Ogden.

Rodney Banks Lyon, owner of Banks Lyon in Lancaster, says he will also retain a degree of involvement in his jewellery business. “I don’t see myself hanging up my clogs and just walking away from the business. I would always want some involvement,” he says.

However, McGraw warns problems are often caused if mum and dad keep meddling. He also advises having businesses valued. “Few independent jewellers know the market value of their business. Have it valued by someone who knows the sector and is a specialist in the jewellery retail market,” he says.

Clearly there is a whole host of emotional and operational issues to contend with when running and then eventually handing over a family business. “The answer is planning, proper training, proper controls, and only selecting the best people to manage - not just those next in line,” says Hoare. Running a family jeweller is never going to be plane sailing and, like every great dynasty, it is sure to have its ups and downs. But, by implementing the right structures and ensuring you have the right leadership, you can ensure that your family will be enjoying the fruits of your labour for generations to come.

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