Canadian businesses, especially those run by immigrant families, are in a succession-planning crisis, says Dr. Pramodita Sharma, who teaches at the John Molson School of Business at Concordia University in Montreal.
A first-of-its kind Deloitte and Touche study from 1999, Are Canadian Family Businesses an Endangered Species?, also found that two-thirds have no written contingency plans to guide them through a disability or death.
"These days, and especially with career couples, you can't just out of the blue say, 'Hey, let's talk about money,' after never having a conversation about money on any major issue for 20 years," Dr. Sharma says, noting businesses haven't made much succession-planning progress since the report was published.
Discussing succession planning with family members is like having a sex talk with your 13-year-old son. It can be uncomfortable but it's necessary, says succession planning expert Dr. Sharma, a first-generation immigrant who was born in India and also lived in Africa and Europe before coming to Canada.
"Sometimes we see parents who think, 'There's nothing here to pass on,' but the children think, 'Actually, I'm quite interested in taking it on.'
"But that communication never happens. Usually, it's the assumptions of the senior generation that are prevalent and very, very rarely do the children get asked: 'What do you want to do?'"
Immigration expert Dr. Monica Boyd estimates that in her University of Toronto sociology class four of every five students come from an immigrant background, so when she lectures on the topic of immigrant children, she can see her students perk up. She says children of immigrants share a common bond, a secret of sorts. Call it pressure, expectation, opportunity. Dr. Boyd calls it common understanding.
"When I talk about the pressure that is on these immigrant children, I stop and say, 'The classic thing is that the parents look at their children and say, "We did it all for you." And the sigh in that classroom is palpable."
For immigrant entrepreneurs - about one-sixth of immigrants are self-employed - the obstacles and sacrifices are daunting. Racism, discrimination, long hours, language barriers, not to mention meagre profits, can make running a family business challenging. But immigrant families often do it so their children, the second generation, can go to university. And they do.
Children of immigrants, particularly from Chinese and Indian families, achieve higher university completion rates than Canadian-born children and many of them graduate with professional degrees, especially in the areas of commerce, engineering and sciences.
Dr. Boyd likes to paraphrase a sociology colleague: "Parents literally will their children to succeed."
Because immigrant offspring frequently pursue higher education, they don't often go into the family business.
Money and mortality conversations don't usually take place until the head of a family business is gravely ill. By then, it's too late to start talking, Dr. Sharma says.
All entrepreneurs, not just immigrants, face two problems when it comes to succession planning: Philosophical problems with getting started and the practical woes.
"You think you're invincible when you're an entrepreneur," Dr. Sharma says. "Here's a person who has come from nowhere land into a different land and made success of a business, so that gives an added edge of confidence to an immigrant business. It gives that edge of, 'I did it all myself and I'm a success now.' But the part that is beyond the control of any human being is the mortality of a human being. That is difficult to face for someone who has created something from nothing."
Dr. Sharma says a business needs at least a decade to create a succession plan. Immigrants might view their businesses as income generators and not necessarily something to pass on to their children. But, Dr. Sharma says, they still need a plan.
"With small businesses, not all of them want to transfer them to the next generation. They're looking to use that little business for the first generation to come into the country, settle themselves and use the income to professionalize the next generation. They don't think this will be the family business forever and ever."
Canadian family-owned businesses are important to the economy. The Deloitte and Touche study found that family businesses have 4.7 million full-time employees, 1.3 million part-time workers and sales of around $1.3 trillion.
Without a succession plan, a family's economic future is in doubt.
"Succession planning is either passing to the next generation of your family, passing to employees … selling it to be merged or acquired by someone or it could be closing the business down. That needs preparation, too. You want to get the maximum value out of the business so it has to be a pro-active succession plan," Dr. Sharma says.
"You don't want death to be the succession plan."
Special to the Globe and Mail