Samworth Brothers Responsible Ownership in Action
Total Page:16
File Type:pdf, Size:1020Kb
S A M W O R T H B R O T H E R S RESPONSIBLE OWNERSHIP IN ACTION 2016 www.ifb.org.uk/research SAMWORTH BROTHERS RESPONSIBLE OWNERSHIP IN ACTION Prepared by: Ajay Bhalla Professor of Innovation and Family Business, Cass Business School Joseph Lampel Eddie Davis Chair Professor of Innovation, Alliance Manchester Business School Aneesh Banerjee Assistant Professor of Management, Cass Business School 2016 SAMWORTH BROTHERS: RESPONSIBLE OWNERSHIP IN ACTION Introduction Ensuring that family and non-family managers worked closely together was a crucial element in Having worked late on 15 October 2015, Mark the growth and success of Samworth. The family Samworth, Chairman of Samworth Brothers, had always been aware that management needed strode out of the company headquarters in the right skills and expertise. Over the years, they Melton Mowbray, England. He was on his way to had learnt how to bring in non-family members they a special family dinner to celebrate 120 years of knew and trusted to take front line responsibilities. the family business. The fact that many existing non-executive post In 2015, Samworth Brothers was a fourth- holders, such as Nick Linney and Jonathan generation family business that employed Warburton, were from family businesses around 8,000 people and had a turnover in the themselves surely helped avoid the divide between region of £1 billion. It was an occasion to look family and non-family managers that often back with pride, but also to reaffirm the family’s bedevilled other family firms. Family and non-family commitment to invest in the business for managers worked so well together that in some generations to come. Longevity, however, was ways Samworth had the feeling of a larger, family- no guarantee of future success. Mark was aware like structure. that Samworth Brothers faced multiple challenges. To begin with, the current Group But this family-like feeling was hard to maintain in a Chief Executive, Lindsey Pownall, was going to company that had grown in scale and diversity. In retire at the end of the year. 2015, the Samworth Group was made up of 17 different companies, operating under the Samworth Along with this impending leadership change, umbrella, in a decentralised model. Mark had decided to step down from his position on the Group Executive Board, having been a This decentralised structure was a deliberate member since its foundation in 1996. He and strategy, based on keeping responsibility, authority Lindsey had worked very effectively together, and opportunity with the people at the sharp end of and both knew that the relationship between the their businesses, allowing companies to think family and the Chief Executive was pivotal to get locally and act quickly, and to stay creative while the best out of the business. belonging to a larger federation. Mark was very keen that Samworth should retain this model. “… Mark saw his role as maintaining the unity whatever we do we’ve got to maintain the integrity and culture of the business: “The job I need to and the culture of the group and how we want to do is the job that only I can do – because it is my run it. We won’t put in place structures that go family business. I have to be the unifying force against that. So centralised structure or strong for the Group, to get around the different divisional structure is a no no.” At the same time, he businesses and protect our culture and values.” was aware of the challenges of decentralisation, Lindsey, on the other hand, emphasised the particularly as the group expanded and its portfolio importance of allowing non-family managers became increasingly complex. These challenges sufficient independence to run the business ranged from practical issues, such as the inability of effectively. She observed, “If you are going to the Financial Director to attend 17 board meetings have a decent balance in the business, the a month, to more significant impacts such as being family have to accept they’ve relinquished less able to react quickly when economic and other operational control, they bring in the crises hit. Lindsey had discovered these issues professionals, you’ve then got to find a route in when she took over as Chief Executive in 2012. that model to get it to work.” 1 SAMWORTH BROTHERS: RESPONSIBLE OWNERSHIP IN ACTION “I found I had a business that wasn’t actually Distribution of meat from producers to retailers via capable of dealing with them. Because everybody wholesalers ended, forcing the closure of had been running silos, there wasn’t really a lot of wholesale meat markets. expertise in dealing with the outside world. There was only a degree of expertise at dealing with the The changes forced the family to temporarily minutia of Samworth Brothers internally.” shut their business. Nevertheless, Frank Samworth continued to work in the meat industry, Mark was keen that the incoming Chief Executive taking on a position as General Manager in a pork would be able to hold the Samworth Brothers products manufacturing company. Here, he learnt Group of 17 companies together, by maintaining many of the lessons of the pork trade and the company’s strong identity and shared Group’s became interested in manufacture and retail. values. In the coming years, the top management Having been part of a family business in his would also need to consider whether the group younger days, he was keen to start his own needed a new way of grouping its constituent business, so in 1950 he bought TN Parr, a companies, for example by product sector or company famous for its pork pies. This move consumer segments. Further into the future there marked the foundation of the modern Samworth was also the issue of succession. Of the G3 family business. The acquisition of John Tebbit brothers, only David had children – a son and Ltd (1953) added van sales to the firm’s assets, three daughters. All three sisters had worked in which had an impact on the future of the the business, but only Mark (G4) was actively business. involved in management, while the fifth generation were all still minors. For the family and The timing was opportune. Wartime food controls the management, whether looking at short-term were removed several years after the war, and or long-term issues, the one thing they were the 1950s ushered in social changes that saw certain about was that they had much to do wage rises and women’s increasing involvement before they can hand over the business to the in the workforce, laying the ground work for the next generation. 1960s consumer boom. This period marked a time of consolidation and growth, with all three of Frank’s sons (Frank Jr., John and David) joining O verview the business. When young George Samworth set up a one- In the late 1960s and the 1970s the company man pig farm in 1896, neither he, nor his sons, entered a period of rapid growth. TN Parr George Jr. and Frank, who later joined him, could merged with Pork Farms in 1969, doubling the have foreseen how much the business would Samworth business almost overnight to 1,000 prosper and grow. Although George Samworth employees, 49 shops and 58 vans. By 1970, the left school at age 11, he demonstrated company had a turnover of £4 million and pre-tax exceptional business acumen. George and his profits in excess of £100,000. In 1971, the two sons bought pigs from all over the country, business was floated on the Stock Exchange as collected them from Birmingham station, then Pork Farms, with the family retaining 65% of the drove the squealing herds through the city ‘on the shares. Despite the difficult economic hoof’ for delivery to individual customers. During environment that the UK experienced during the the interwar years (1918–1939) the business 1970s, starting with the 1973 oil crisis, the three- flourished, but the outbreak of war in 1939 led to day week, and rising labour and raw material changes in the structure of the industry. Food costs that led to erosion of profit margins, the control became the responsibility of the newly company refused to cut costs by compromising formed Ministry of Food. on the quality of products. 2 SAMWORTH BROTHERS: RESPONSIBLE OWNERSHIP IN ACTION Instead, the company invested in modern more emphasis on organic growth; developing bakeries and state of the art machinery, more new businesses as the business adapted to than doubling Pork Farm’s production. The changing consumer habits and lifestyles. company used its production capacity and Examples included Tamar Foods (Cornwall) and reputation for quality to launch its own label in the Saladworks (Leicestershire). However, adverse growing supermarket industry. The initial own- economic conditions after the 2008 financial label contract with Sainsbury’s marked the start of crash made organic growth harder and an important aspect of the Samworth business acquisitions once again became an attractive model that continues to dominate today. A year option. The crash also forced an increased focus after the Pork Farms floatation, the business was on cost management; a difficult balancing act for turning over £11.3 million per annum with pre-tax a business that prides itself on producing high profits of almost £777,000. quality goods without cutting corners. However, by 1977 the Samworth brothers P ortfolio of companies came to see the floatation as more a burden than an advantage. They decided to sell Pork Farms to i n 2015 Northern Foods, a company they knew well and that had a good reputation for looking after their In 2015, the focus of Samworth Brothers’ portfolio people – an important consideration reflecting the of 17 businesses was food – food to go (e.g.