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Hannah Harris: Change can come with an emotional cost

In March’s issue of The Lede, we spoke to PwC’s UK Family Business Leader, Hannah Harris, about the challenge and imperative of reinvention, engaging and developing next-generation family members, as well as earning a family’s trust.

Hannah Harris is UK Family Business Leader at PwC. Hannah advises UK clients on a broad range of family business challenges and issues, including family governance, structure and succession planning, as well as next-gen development. She has a particular focus on the importance of strategy, governance, vision, purpose, trust, brand and reputation to a family business.

Are family businesses particularly well-placed to reinvent themselves in the face of disruptive change?

Hannah: Every business faces the need to reinvent itself, but family businesses are good at recognising that need because they have longer term horizons. Once they’ve spotted an opportunity, they’re then generally better at implementing changes quickly because they’re not answering to short-term shareholders. You also tend to find the next gen have a louder voice in family businesses, which drives change faster.

What barriers to change do family businesses tend to face?

Hannah: There are some families where change comes with an emotional cost. One business made a very specific product that had reached saturation point in the market, but the family struggled to unite about where to go next for growth because this product was part of their identity.

There's a hard decision to be made here about what long term success looks like – is it growing and protecting the legacy business, or is it growing the long term wealth of the family? These are two different things.

Family businesses are also traditionally seen as financially risk averse. However, Covid highlighted to many that just focusing on your core business is actually quite a risky thing to do, so we’re seeing more diversification, and families creating investment companies and family office structures above the core business.

Why do leadership and purpose matter so much for successful reinvention?

Hannah: Employees and managers have to understand and buy into the decisions you’re making. This is where knowing your values is really important, and many family businesses have a real advantage here. They’re often rooted in the communities they operate in, and take their responsibilities to employees and suppliers very seriously.

But if you don’t communicate your values properly, you won’t bring your people with you. And the reputational risk is also much higher – and more personal – if something goes wrong, because your name’s over the door.

Reinvention requires a diverse set of skills at the top, whether that’s around digital technology or ESG. But you won’t necessarily have those skills within the family, unless you’ve been very good at family development. This means you need to bring in outside expertise at a senior level. How do you attract people to your board when they won’t get an ownership stake and may fear the family will keep overruling them? Having transparency over your leadership and governance is therefore becoming more important in the war for talent.

What can families do to invest in the next gen’s leadership capabilities?

Hannah: I try to shift the mindset away from talking just about who is the next CEO. All of the next generation are going to be owners of the business, so families should prepare them for that - making sure they have a good understanding of how the business works, where it makes its money and what level of risk it takes.

For leadership development, there needs to be clear protocols around how you earn a place in the business, and also around things like retirement ages. People need to see what their path looks like.

Sometimes this involves next gens getting external experience, but actually families have moved away from grooming the firstborn son towards not wanting to force anyone into the business. The next gen often have very successful external careers as a result, which brings its own challenges. In one family I worked with, the next gen were so successful that it just wasn’t financially attractive for them to work in the family business, which then struggled to get the talent it needed.

What can you do to earn the trust of family clients?

Hannah: The initial stages can take time. There’s no point in an advisor swooping in a shiny suit to tell them what to do. So often I’ve heard ‘I get you know business, but you don’t know my business’. So you’ve got to prove you’re there to learn their business, which means understanding the emotional as well as the business dynamics.

That means you’ve got to listen to all the stakeholders. Usually we’re brought in because there’s a specific issue causing frustration to a certain family member. Nearly always, we end up helping with something else because we only had that family member’s view on it. When you speak to the other stakeholders, you can flush out what the block really is. Often they have completely different views about the direction of the business, and there’s no point in working on the strategy until they’re all aligned about the direction.

About Hannah Harris

Hannah Harris is UK Family Business Leader at PwC. She advises on all aspects surrounding the family ownership of the business, from corporate and shareholder governance, structure and succession planning to preparing the next generation to take on senior roles in the business. She also works with subject matter experts across PwC to help Family Office clients address a wide range of strategy, governance and risk challenges relating to their businesses and family wealth.

About The Lede

This article was originally published in The Lede, Transmission Private’s monthly newsletter that tracks the future of reputation management. Featuring interviews with leading private client advisers from the worlds of law, finance, and accountancy, sign up today to receive the newsletter in your inbox every month.

Transmission Private publishes a monthly newsletter that tracks the future of reputation management for private clients.

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Transmission Private publishes a monthly newsletter that tracks the future of reputation management for private clients.