Do the UK’s forgotten mid-sized firms lack ambition and a competitive edge

This is a good article for students looking at the growth of firms, particularly those firms that have been established for some time but which appear to have got stuck in a phase of mature revenue growth, or worse, declining revenues.

A level business exam case studies often feature family-owned and managed businesses. In the typical scenario, the founder has stayed with the business after an initial period of success and rapid growth, employing other members of the family along the way. Eventually the business finds itself stuck in a rut, lacking ambition, financial resources and clear competitive advantages.

A new survey, reported here in the Telegraph, might help students understand some of the reasons for this problem.

http://www.telegraph.co.uk/finance/festival-of-business/8844514/CBI-urges-forgotten-army-of-private-companies-to-become-more-ambitious.html

In Germany they are called the Mittalstand - a large group of privately-owned businesses which generate a substantial proportion of Germany’s GDP and thrive in export markets around the globe.

The UK also has a significant number of mid-sized companies. However, far from being an economic powerhouse, UK mid-sized firms have come under criticism from the employers organisation - the CBI (Confederation of British Industry).

The CBI commissioned consultants McKinsey to study what makes companies with between £10m and £100m in turnover tick and found many lacked the management ability of their overseas rivals.

In particular too many British companies are run by family members who do not have the necessary skills, according to McKinsey.

The implication is clear (and somewhat worrying for the UK economy, given the need for the private sector to generate 000’s of new jobs).

Family-run firms may have several advantages in terms of their long-term survival (stability of management, less risk-taking, conservative approach to cash flow management, loyalty of employees).

However, the downside for the UK economy is that these firms often don’t grow as fast as they could. Their management is too cautious and potentially lacking the skills and experience to exploit significant growth opportunities.

A good discussion point for students might focus on the potential benefits and drawbacks to private-owned mid-sized firms of external recruitment into senior management positions.

Is it best for a family firm to remain in control of the family, or to let go and potentially allow the firm to flourish under new management?

Another angle, with more of a research focus, would be for students to identify some larger, family-owned private businesses in their locality. What evidence is there that these firms are growing?