Family-owned businesses that remain operating from generation to generation aren’t just beating the odds; their longevity shows the advantages of having different perspectives, greater consistency and long-term stability.
With a common purpose, open communication, the right governance models and advice, entrepreneurial families set themselves up for success through multiple generations, says Krista Han, a designated Family Enterprise Advisor at Grant Thornton LLP, based in Fredericton.
“These are baseline requirements for any successful organization, and particularly a family business,” says Ms. Han, who works with family businesses that span as many as three generations or that have “generational intent.”
The advantages of multigenerational businesses include the fact that they have shared core values, varied points of view and a “next-gen” element, Ms. Han says. They are also typically farther along in creating governance structures and promoting communications that are beneficial to the business’s functioning. Challenges, meanwhile, can include getting people of different ages and experiences on the same page, especially as they have different risk appetites, time horizons, approaches and lenses through which they see matters.
“Oftentimes there’s an inherent bias toward the skills and capabilities of next-gen leaders,” observes Ms. Han, noting that such issues should be identified and cleared up so they do not affect decision-making.
A Conference Board of Canada research paper commissioned by the Family Enterprise Xchange Foundation last autumn found that family enterprises, which it said account for some 50 per cent of private-sector gross domestic product and nearly seven million Canadian jobs, “sustain a multigenerational commitment to job creation and to the social cohesion that builds community and national prosperity.”
Ms. Han says entrepreneurial dynasties require a governance model with three circles representing the business, the owners and the family, overlapping in the centre. Each group should have its own support structure, for example a “family forum” brings clarity around the family’s clearly defined guiding principles. Professionals designated through the Family Enterprise Advisors program, including accountants, lawyers, bankers, insurance and wealth advisers and coaches, can help set up structures, policies and procedures that serve both the business and family.
She says that multigenerational success especially comes through a culture that embraces continuing education and growth, healthy interactions and strong interpersonal connection.
“Clear communications are especially critical,” Ms. Han explains, noting that it’s important to consider the impact of business decisions on family relationships. Rules must “stand the test of time” and especially help the different generations weather inevitable periods of stress and disruption together.
“If we have a way that we know works to make decisions, then we’re going to make better decisions in a crisis,” she says. “The structure and the process are already built, so they should bring better thinking when there’s pressure in the system.”
Grant Thornton is committed to helping businesses navigate the impacts of COVID-19.
For more information, visit www.grantthornton.ca.
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