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New governance models are sign of the times

In these uncertain times, family businesses should look to models outside the traditional, the judging panel of this year's UK-based Coutts Prize for Family Business has said in an exclusive roundtable with Campden FB.

With the announcement of the regional award finalists earlier this year, the judging panel said it was important that business-owning families take on advice and start thinking outside the box.

Lucy Armstrong, CEO of business advisors The Alchemists and Coutts Prize judge, said immigrant families that come to the UK bring a different kind of family ethos and a different kind of family involvement that native British families could learn from.

Among the regional winners was West Bromwich-based East End Foods, which was named "Best UK Family Business, Northern England and the Midlands Region" in the £25m+ turnover category. The company will now go on to compete in the same category at the national finals to be held in London on 23 June 2009.

Formed in 1972 by the Wouhra brothers, East End Foods is a second-generation family business and is the largest importer of Indian food products and ingredients to the UK.

Armstrong said that East End Foods was one of many nominated businesses that mixed traditional British business structures and strategies with other disciplines and traditions.

"It is often a different kind of decision-making within the family than the more traditional 'Anglo-Saxon' kind," said Armstrong. "Certainly my experience judging this award is that those businesses have typically gone through less iterations of succession but have often already achieved great scale.

Arguably, they have catapulted through the growth phase in a relatively short period of time. But the governance has usually taken a different route to the traditional Anglo-Saxon model."

Juliette Johnson, senior family business advisor at Coutts, said: "Success factors that can help family businesses adapt to the current economic downturn are at the heart of the fourth Coutts Prize for Family Business. It will be equally important to take active steps to manage the family as well as the business to survive the current recession."

Johnson said that in families that have immigrated to the UK and set up their own businesses, there is more of a tradition of building family partnerships than formalising governance structures.

"Whereas in a traditional Anglo-Saxon family you would have a succession where one generation steps away the next generation comes up – and there is governance to manage that transition – in many other tradition, there is a transition where both generations work together," said Johnson.

"Respect for what the older generation and younger generation can bring is built up via a partnership between the two. Because they are working so closely together, those governance mechanisms enable communication between generations and stability across the transitional stage."

The Coutts Prize's independent evaluation committee looked for examples of best practice in criteria such as: the strength of the family's values; the separation of ownership and management; the development of a succession planning process; next generation development; and

One area where regional award winners stood out was in the provision of corporate governance, said judge Chris Swaffin-Smith, principal of advisory firm Family Business Reflections. "There was a significant difference between the concept of governance for the successful and unsuccessful nominees," he said.

"Even though there may have been a tremendous amount of informality, even with the winners, the key was that as the family business developed it was the ones that identified the difference between board functions, operational functions and owner functions that stood out. And they were distinguishing this in a way that structurally made a difference."

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