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Where Family Dynamics and Business Interests Intersect

Take a close look at Canada's estimated 1.1 million businesses and you'll see many husband-and-wife owners, management teams that share a family name, and children of founders in apprenticeship for the top posts their parents are set to relinquish in the coming years.

Family businesses are a collective powerhouse driving the country's economy, accounting for a significant percentage of the country's aggregate business sector. While there are no current statistics measuring the prevalence of family ownership among Canadian businesses, previous estimates peg this at between 80 and 90 per cent of all companies in Canada.

"Some of the biggest and most successful businesses in Canada are family-owned," says Paul MacDonald, executive director at the Canadian Association of Family Enterprise (CAFE), a national not-for-profit organization that promotes the well-being, understanding and success of families in business.

"People often think of family business as the small mom-and-pop operation, but the reality is family businesses range from the very small to the very large, and they run across all industry sectors," adds Mr. MacDonald.

Like all businesses, family enterprises face a host of challenges as they strive to grow and remain competitive, says Arthur Salzer, CEO and CIO at Northland Wealth, a Toronto-based family office that provides investment and strategic guidance to some of Canada's largest family businesses. But unlike other businesses, family enterprises must deal with the complexities created by the presence and influence of a business partner or executive who is just as likely to be seated at the family Thanksgiving dinner as they are at the next sales meeting.

Addressing these complexities effectively is key to keeping the business healthy, competitive and sustainable over generations, says Mr. Salzer. Because it's too easy for personal dynamics and issues to spill into the business, it's important that the family learns to view itself as an institution complete with formal rules and mandates – basically a family constitution – as well as a council, says Mr. Salzer.

"Families that are successful tend to operate like a business, and different parts of the family elect a representative who will go to the council to get their requests or opinions heard," he says. "When families work together like this and feel they have the ability to have their say, then it's easier to get consensus on decisions."

It's a good idea to bring in third-party counsellors or consultants who have experience working with family businesses, says Mr. Salzer.

Another critical challenge that can make or break a family enterprise is the integration of other relatives into the business. That's why it's important for family business leaders to define the criteria and process for bringing in a child, sibling or other kin, says Mr. Salzer. "You need to do this in a way that makes sense for the business and won't be seen by other employees or relatives as being incredibly unfair," he says.

Some families require all incoming relatives to have post-secondary education and work experience in another company. The new family employee may also be required to start at the bottom, or to hop from department to department to gain experience in all facets of the business.

While there are no hard and fast rules for integrating a family member into the business, what's most important is to ensure job appointments match skills and experience, says Mr. Salzer. Continuity and succession are big concerns for any business, but in a family-owned company, this challenge is often compounded by feelings of entitlement to the leadership based on family hierarchy, rather than merit. As the founders' children start their own families, the stakeholder structure also becomes more complicated.

Allen Taylor, CAFE chair and president of Taylor Pipe Supports in Burlington, Ont., says it's critical to start talking as early as possible to the next generation of family owners. The talks don't have to be formal or concrete when the kids are young, but rather just "blue sky" discussions about the business and what the children see themselves doing in the future. When their children become adults, business owners should sit down at least once a year to assess the skills and interests of this cohort of potential owners and managers, says Mr. Taylor. "Businesses should not look at this as a process they wait to do until there's a need for it," he says. "Building a successful and competitive business takes continual planning, and that includes planning for the handoff to the next generation of family owners."

BY THE NUMBERS According to research from the University of Alberta, family businesses generate approximately 60% of Canada’s Gross Domestic Product, employ 6 million people in Canada, create 70% of all new jobs in North America and account for 55% of all charitable donations Click here for the original article in the Globe & Mail.


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