One of the biggest risks in the economy is the fumbled hand-off of family businesses from one generation to the next. The expession "shirtsleeves to shirtsleeves in three generations" sums this up nicely: the first generation builds a successful business, the second generation carries on in a diminished way, and the third generation inherits a mess and then starts over again.
Imagine the benefits to the Canadian economy if we could improve the success rate of family-business succession. Important companies and capital pools could be preserved, jobs maintained, and successful business practices and innovations shared for the future.
Better planning, documentation and family communication are among the usual remedies prescribed to relieve the succession crisis. But none address the real problem. As the patriarch of one business family once said to me, "The hardest part is figuring out whether your children are worthy or capable of following in your business footsteps." Meanwhile, his children had different thoughts: "Your footsteps are no longer heading in the right direction. Thanks for the years of building your legacy, but please take a back seat."
Internships and family councils won't bridge this generation gap.
But now a Montreal foundation has come up with an innovative new approach to help business families come together. And non-family business owners find this a model for relieving their own growth and succession bottlenecks.
Olivier de Richoufftz is president of the Business Families Foundation, set up by Philippe de Gaspé Beaubien, the former CEO of Telemedia, and his wife and business partner, Nan-b. Twenty-six years ago, after wrestling with finding the best way to hand their business empire to their three children, Phillipe and Nan-b formed the foundation to help other business families manage this problem.
Mr. de Richoufftz defines the problem this way: The parents running a business tend to assume their children will take over some day, but they rarely communicate their intentions until too late. Families rarely discuss who wants to do what in the family business. But even if successors and leaders are identified, problems remain:
· When and how will the senior generation give up power?
· With equal numbers of shares, how will the next generation work together?
· How will they resolve disputes?
· How do family-owned businesses hire and retain talented senior employees if they know the kids are going to come along and supplant them, or at the very least shake things up?
The foundation's new approach, which is now being workshopped by a dozen business families in Quebec, addresses all these problems. It does so by changing the basic assumptions behind family succession. Instead of seeing the founders' children as the inheritors and future executives of mom and dad's business, this approach encourages them to become entrepreneurs – but with internal advantages. "We are turning business families into intrapreneurial families," says Mr. de Richoufftz.
He says children in a business family should see themselves as intrapreneurs. That is, they should look for new business opportunities that would fit their skills and interests – and then tap the resources of the family business to help them start stronger and grow faster than the average independent business. (This brings new meaning to the phrase "mother ship.")
The foundation's 100-day Intrapreneur Program, co-sponsored by Quebec's Caisse de dépôt, works like a business incubator. Its first cohort, which began in September, includes 15 intrapreneurial projects, each team including one or two intrapreneurs as well as a business mentor, or parrain, to hone their plan and help figure out the best way to work with the family business. "Instead of startups, our aim is to create spinoffs," says Mr. de Richoufftz. "The family business is not here to give you a cheque, but to support your dream. After 100 days you'll know if you're qualified for this."
The program brings participants together every two weeks for seminars, lectures and candid conversations on business plans and family dynamics. The intrapreneurs conclude the program by making a formal business presentation to their parents or first-generation business leaders, identifying the opportunity they see, and the resources (e.g. capital, facilities, or HR expertise) they wish to tap into from the family business. Mom and dad can push back, ask questions, or negotiate the family's involvement in the new venture.
Result: the second-generation leaders access business experience and resources without disrupting the family business. Brothers and sisters can pursue their personal ambitions without getting in each others' way.
Mr. de Richoufftz notes that some of these new "interprises" may become "way larger" than the primary business: "In some cases, we see the intrapreneur taking over the core company." But such cases would see the intrapreneur as an experienced business leader moving in with a proven business model – not just a young amateur with kooky ideas. Such successful entrepreneurs would be better able to buy their parents' businesses than they might have been as employees, thereby solving the financial-succession problem that often leashes together siblings who would rather not work together. "Only strong families build strong businesses," says Mr. de Richoufftz.
The Business Families Foundation plans to launch a second cohort in February, and hopes to include family companies from Toronto and Vancouver. (The cost is expected to be $8,000 per venture.) Mr. de Richoufftz wants to take the program national, and then global: "We are looking at partners to help us scale it up."
I am excited about this new model for improving the success of family business. But I'm also keen on the implication for other companies. Every business has trouble retaining great employees, especially senior people with high potential and great ideas. Why shouldn't those employers find new ways to work with these people? By offering resources or even capital, business owners could stay linked with these employees, and share in their future growth, and learn from their success.
You don't have to be related to think like family.
Ken Tencer is chief executive officer of design-driven strategy firm Spyder Works Inc. and the co-author of two books on innovation, including the bestseller Cause a Disturbance. He holds the Institute of Corporate Directors certification (ICD.D). Follow him on Twitter at @90per centRule.