04 Mar Doing the Family Business Dance
Family business is undoubtedly unique, with huge potential for creating strong connections to a community, building lasting family legacies, and inspiring loyalty among staff and clientele.
The catch is that with such unique benefits also come unique challenges, in the form of succession planning, managing the expectations of younger generations, fair treatment of non-family employees alongside family employees, and added complication when it comes to conflict resolution. Unfortunately for many family businesses in Canada, these challenges can prove disastrous—70% fail before they are passed on to the second generation, and 88% fail before succession to the third generation.
I feel a special attachment to the treasure that is a strong family business. I spent the first 18 years of my life immersed in an incredibly successful first-generation family business in Northern Alberta and B.C.—and I’m so proud of what my parents, uncles, aunts, and cousins have built. During my BCom at the Alberta School of Business, I studied family enterprise, and at Incite I now get to work with many family business clients of all stages and sizes as they navigate some of these unique challenges.
So what have I learned? These best practices are major steps toward the long-term success of a family business through multiple generations:
- Establish roles based on natural traits and developed skill sets. One of the beautiful things about a family-ownership structure is the equality in commitment and motivation. However, this can also result in the wrong people being in charge of making crucial decisions. Be honest and identify who in the family has the skills, knowledge, and personality for key roles and functions such as financial oversight, logistics, human resources, marketing, sales, and customer service.
- Fill the gaps. If you follow the above rule, there are bound to be critical leadership roles left unfilled by family members. After you identify where those gaps are, consider filling them through one of these avenues to ensure long-term success:
• Partner with a third-party service provider or consultant—for example, an outsourced bookkeeper, recruiter, or marketing firm.
• Hire or promote qualified people who are not family members, but who fit in with your company and family culture.
• If a role must be filled by a currently underqualified family member, pursue professional development and training options. The investment is well worth it in the long run!
- Carry out annual performance reviews for all employees at all levels, family and non-family, in an unbiased and constructive way. The 360-degree feedback model is a great way to do this. Allowing open and ongoing feedback helps to hold everyone accountable and also helps to avoid the dangers of nepotism, whether real or perceived.
- Prepare yourself and foster an environment that allows for change. Know that future generations are going to want to improve upon what you’ve built and keep up with modern technology and industry trends, and as they should; innovation and continuous improvement are critical to long term success.
- Plan for succession, and do it early. The best way to navigate the challenges of succession planning is to be proactive. Many successful founding business owners hold out hope for their children to show an interest in the family business—or fail to address misaligned expectations, without a backup plan—until they’re near retirement. At that point, it’s often too late to find and prepare the right successor. There are resources in Alberta available to help (no matter how near or far you are from retiring), including the Alberta Business Family Institute (ABFI) at the University of Alberta School of Business, and consultants who specialize in planning for succession.
Alberta is home to many great family business success stories, and they make invaluable contributions to our communities and our economy. Here’s to the long-term success of the family businesses that we are proud to work with and support!