The last great test: An interview with Alex Scott, Chairman of Schroders Family Office Service
An interview with Alex Scott, Chairman of Schroders Family Office Service
In 2020, Alex Scott, stepped-down from his role as Chairman and CEO of Applerigg, a private, family-owned business built on the foundations of a financial services group established by his great-grandfather in 1903. A fourth-generation leader of the Scott family’s business, he has been both a successor and managed his own succession. As a result, he has a deep personal understanding of the responsibilities and challenges of managing generational transition, as well as the opportunities.
According to Alex, succession is a vital part of a family business’s success, particularly because there’s a predilection among businesses not to endure multiple generations. That’s not necessarily because of succession issues, he stresses, it might be that the market the company operates in just isn’t conducive to long-lasting businesses. However, you can’t go through the generations if you don’t get that critical element right.
An essential part of getting it right is nailing the timing. How do you know when it’s time to go?
“In my own case,” says Alex, “it was when I knew I had a successor who was ready, and that coincided with where I was in my life cycle. I’m 62 and although I had no desire to stop working, I was conscious that I’m not immortal! I was also aware that the last great test for leaders of a family business is to ensure a good succession.
“We facilitate family get-togethers where we spend time with each other and get to know each other. It’s an important part of ensuring that there’s coherence amongst the family group and it’s something we’ve invested in for the last twenty-odd years,” Alex says.
What happens if the successor is ready ten years before the leader is willing to relinquish the reins?
“My decision would be based on what the business was doing at the time. For example, if we were in the middle of a project that needed to complete. It would depend on my own demeanour, but also on where exactly the business was,” says Alex. “People are capable – I was asked to succeed in my early 30s. If a great successor is available, then it provides a really interesting dilemma for the leader who’s in place if they don’t feel ready to go. But it’s a quality problem,” he adds, “because you’ve got, hopefully, two great leaders! Can they cohabit? Probably not. You need to give your successor time and space to develop and to, frankly, get out of the way.”
Avoid the void – what do leaders step-off into?
“I’ve made it my ‘hobby’ over the last decade to look at people of my age and older, to see how they handle stepping-off,” recounts Alex. “My take is that the better the hinterland that the individual has developed, the more choices they have about succession and being succeeded. The wider the breadth of their interests, be they for profit or not for profit,
the more fun they can have. Family business is not a job it’s a vocation,” he exclaims. “You’ll probably carry on in business, you won’t just stop. I think it’s partly the job of the individual being succeeded to make sure they’ve got options that mean they can step-off, but not many do in my limited experience.”
Alex remains a Trustee of Grosvenor and chairs the Grosvenor Pension Plan and Grosvenor Food & AgTech. He is a Director of the Family Business Network International, co-founded and is Joint Life President of the Institute for Family Business (UK) and is a Director of the International Federation of Family Offices. He is also a Trustee of the Francis C Scott Charitable Trust and the Cumbria Community Foundation.
“As the business leader, your brain has been multifaceted, dealing with multiple issues and challenges. To keep yourself interested, stimulated, engaged, and intellectually agile, you’ve got to replicate some of the challenges that you had when you were solely focussed on one business. Just playing a sport, for example, isn’t sufficient of a hinterland to keep a busy business person really interested,” he believes. “Your brain isn’t ready for that!”
“You can create a family council, shareholder advisory committee, or other form of sounding board, but all of those run the risk of being shadow governance. I’m sure lots of family business owners would disagree with me, but let your successor grasp the role as hopefully you were allowed to grasp it. And if you weren’t allowed to grasp it, put yourself back in the position you were in and remember how frustrated you were that you weren’t allowed to make your own mark,” Alex adds.
Alex recognises that it’s different for a creator compared to a successor.
“If you’ve created the company, then I think it’s really hard to build a hinterland because it will have taken all your time and effort and one hundred percent concentration, to create something unusual and extraordinary in the classic sense of the word. Most of your social interactions and leisure will have been linked into the business – it becomes all consuming. My own path has been a bit of a rounder walk,” he says. “The successor and subsequent generations, will probably have had a different up-bringing and education, travelled and had time to contextualise what they’re inheriting, which allows them to develop a broader approach to life,” Alex explains. “While the company is utterly central to everything that the successor is and will be, they have the capacity, the time, space, the breadth of experience and education to take on outside interests. I think that’s part of the richness and the
good fortune of being an inheritor as opposed to being a wealth creator,” he adds.
Don’t be the family member that crushes someone else’s dreams…
“If you’re leading a large family, which is the case with us, then whoever succeeds to that position has to be objectively suitable and acceptable as a leader. I’m not saying that potential successors should lobby their cousins,” jokes Alex. “Rather that when viewed objectively, the achievements and characteristics of that individual clearly position them as an someone who is properly equipped to lead the business.
Alex followed in his predecessors’ footsteps by taking guidance of non-family, non-executive directors to select his successor. Their advice was important, he says. “It’s very hard to be objective about your children, or your cousins,” he explains. “We all remember each other from decades ago, but we change over time, have different experiences and develop. I don’t want anyone to measure me on what I was like when I was 19!
“It’s critical to find an objective means of verifying that the individual is really competent to take-on the job. You can put people through a process, but we’ve always relied on non-family, reputable directors and probably, their most critical job is to be influential in succession,” he says. “They need to be comfortable that the right individual has come through the process and in order to do that you can’t just bring them in for succession. They’ve got to know you, the family and the business: what it needs and what it will take in future.
“You’re dealing with peoples’ hopes and dreams, so my advice is to pass the job on to
the non-execs – they’re not going to have to go to the family Christmas parties and the weddings!” he jokes.
“If their job is to assist the family to ensure the long term health of the company then the most important job that any non-executive or any director takes is the appointment of the Chair and the Chief Executive. The choice of people is critical. If the family decides not to listen to those non-executives, then caveat emptor,” he says.