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staying private

From left, third and fourth-generation executives of Halifax Seed: Emily Tregunno, Fraser Moir, Tim Tregunno, Nancy Tregunno, Alison Tregunno and Mitch Gallant.Alex & Kate MacAulay

Emily Tregunno is a fourth-generation family business executive. Some of the employees who work at the Halifax Seed Company Inc. still remember the day that her grandfather, bursting with pride, told them about her birth. Still, despite the national seed trade shows the family visited on holidays and the summers she worked filling seed packets for orders, she never saw the family firm as part of her future.

She and her sister, Alison, went through a period when they thought the seed business was not their destiny, she says. "We wanted our own identity."

Today, however, Emily is chief of marketing and graphics (she has a BSc in psychology) and Alison is in charge of sales in New Brunswick (she had a career in sports and recreation).

Halifax Seed specializes in seeds, as well as supplies for landscaping and garden centres, golf source supplies and professional growing equipment, and says it has about 75 employees.

It's a rather rare phenomenon in the family business landscape in Canada. A Family Firm Institute study showed that only about 30 per cent of all family-owned businesses survive into the second generation, with only 12 per cent viable into the third, and a mere 3 per cent still operating at the fourth generation and beyond.

According to John Davis, a leading expert on family business from the Harvard Business School, the structure of family business becomes more complicated as it goes through succeeding generations. While the family firm traditionally begins with one person who makes most of the key decisions, the next phase may feature multiple decision makers who may not agree with each other. "It is rare that sibling-dominated boards accomplish much," Dr. Davis says. If two of them sit on the board, they are "typically quite sensitive to each other" and either avoid confrontations or escalate conflict, he said.

Family businesses that have two or more cousins controlling the company, can have "bloated, highly political boards," Mr. Davis said. However, over time, family businesses may learn the value of a well-run board, he said.

Family businesses are a vital part of the world economy, generating 70 to 90 per cent of global gross domestic product, says Paul MacDonald, executive director of the Canadian Association of Family Enterprise (CAFE), which last year awarded Halifax Seed Company as Family Business of the Year for engaging in all of the best practices that the organization promotes.

In Canada, about half of the Canadian work force is employed by a family business, creating nearly 45 per cent of Canadian GDP, according to the Family Firm Institute. These family businesses have many advantages, according to researchers Danny Miller and Isabelle Le Breton-Miller at HEC Montréal business school, associated with the Université de Montréal: They tend to focus on making long-term investment decisions; they "unite the tribe" so that employees become an extension of the family; they build better connections with customers and suppliers; and they tend to be more decisive because the links between shareholders and management are closer. Therefore, they can respond to changing markets more quickly.

But a lot can go wrong, too. B.C. family business adviser David Bentall of Next Step Advisors Inc. in Vancouver says four things can dismantle a family business: lack of communication, lack of education, lack of governance and lack of planning.

All four of these factors tripped up the Bentall family construction and real estate company as brothers Bob and Clark clashed over the direction of the firm. The second generation, which included David, gravitated toward one side or the other. Although the five Bentall towers loom over Burrard Street, the founding family is no longer owner or operator of the Bentall Kennedy real estate advisory firm.

"We had a lack of communication, we had a lack of education about what's best practice in family business, we had very limited investment in governance – both in the family and the business – and limited investment in planning," he says. " We ended up having challenges and then we placed priority in management succession rather than ownership succession."

Many of the ills that family businesses encounter bubble up as the first generation attempts to hand off the torch to the next. The Tregunno family had no choice but to deal with succession plans. In 2005, the family patriarch, Tim Tregunno, was diagnosed with cancer. He died on Feb. 25 last year at 55.

Currently, his wife Nancy and her brother Mike Barclay, a part-owner since 1983, own the company, while the fourth generation, which also includes Emily's husband Fraser Moir (sales), work in the company.

Emily says she does not know how much her father's illness played into her decision to take a full-time position with Halifax Seed. "I think a lot of it was emotion, too," she says. But there was a need for someone to take a step into marketing and graphics. Emily returned to school and took some design classes.

When Tim became too ill to work in 2010, he set up an advisory board, which helped with succession planning and bringing the remaining family members up to speed on the running of the business.

The advisory board is made up of company outsiders, but they were picked because they understood the family governance, and its values: putting customers and employees first, forging strong relationships with suppliers and customers, and participating in the broader community, such as setting up a scholarship fund with horticultural students at a local community college.

Emily is aware that many family businesses aren't keen on welcoming insiders into the fold to peer into their inner workings. "But it has been so beneficial to us and it provides support where we need it," she says.

The management board, made up of the company principals and various managers, have also shown loyalty by supporting the transitions in the tightly knit company. "We have the best and most loyal and understanding employees anybody could ever ask for," Emily says. "Dad always said that it's the second family. They are an extension of our family. If it wasn't for the people that we have here, I don't know how we would have gotten through the last three years."

Succession seems to have gone smoothly for the Tregunno clan, but it's a tripping point for many other companies. Succession is more than a tax-effective transfer of assets, says Mr. Bentall. And it's not just about who will run the company next: That's the job of management succession.

Identifying who will actually own the business and how it will be governed is key. "If you haven't transferred ownership to the next generation, and who knows who's going to own it, then everybody is arguing about who will run the company," Mr. Bentall says.

Still, when family businesses work, they work well. A European study of global businesses indicates that the average lifespan of a company is 12 years, but the average lifespan of a family company is 24 years.

Emily would love the business to continue on for further generations, but there are no expectations. "We're still trying to figure out our own expectations. This past year has been a whirlwind. Our employees are still grieving, too."

For now, the goal is to get through the period of transition, and then set their sights on growth, she says.