image: Information from 300 Canadian family businesses interviewed in June 2021. Source: Family Enterprise Canada (FEC) and KPMG Report. view more
Credit: University of Ottawa
It’s advice Logan Roy, the fictional patriarch from the TV program Succession, would not want to hear but must heed: family businesses must prepare the next generation or risk watching their businesses crumble.
Predictably, family business succession can be a complicated affair and the COVID-19 pandemic hasn’t helped. Ownership of more than 60% of family enterprises will be changing hands within the next decade, yet there are few resources available to help them navigate this difficult and personal path – until now. The University of Ottawa’s Telfer School of Management intends to help this essential piece of Canada’s economy through its new one-of-a-kind thinktank, the Family Enterprise Legacy Institute (FELI).
With a mission to empower the next generation of enterprising families, FELI’s top priority will be to share knowledge and practices with NextGen leaders. Customized programs such as the Certificate in Responsible Ownership will support the members of the next generation in their personal and professional development, helping them thrive in their envisioned roles of trusted family member, responsible business owner, prospective business leader, and/or steward of the family wealth.
Peter Jaskiewicz is the inaugural director of FELI and co-author of the recently published book Enabling Next Generation Legacies: 35 Questions that Next Generation Members in Enterprising Families Ask. Along with co-author Sabine Rau, a Visiting Professor at Telfer, the book explains why it’s in the economy’s best interest that family businesses stay as family businesses: “The global economic recovery will rely disproportionately on the success family-owned enterprises achieve in managing next generation transitions. These organizations include 60% of the global workforce, account for two-thirds of the world’s businesses, and contribute 66% of worldwide GDP.”
Professor Jaskiewicz took time to delve into the role FELI will perform for Canadian family businesses.
Where does the Family Enterprise Legacy Institute fit into the Canadian business landscape?
“We are aspiring to be one of the top institutes in the world researching best practices for family businesses and sharing them with the next generation. Family businesses are often reluctant to ask for help due to the personal nature of their needs. And many of these businesses have problems that need to be addressed. We are here to bridge this gap.
“Family businesses don’t receive the same support as big corporations, who also have bigger lobbies to help with this. But two-thirds of our economy is comprised of family businesses and they sometimes feel left out in the cold. So, by sharing best practices with them and preparing their next generation, you can strengthen these families, their businesses and communities for a better Canada.”
What are the benefits of nurturing the next generation in family business?
“Our research projects help to develop best practices. For instance, we find that when the parents know they have competent and willing next generation members, they are more motivated to work hard and prepare the business to be at peak level when they pass it over. They invest heavily before retirement despite studies prior having shown they normally save to prepare for retirement. They are motivated and jump forward before the succession, and the next generation members are catapulted to a healthy business. This entrepreneurial leap allows the business to take off under the helm of the next generation.”
“But if the parents are uncertain about their kid’s willingness and ability, they will only invest a fraction of what motivated parents invest before retirement, making it much harder for the next generation members to succeed after the transition; sometimes the next generation members will pursue other opportunities when they feel they lack the parents’ full support. In some other cases, the next generation members are skilled and willing but the parents do not see it. Therefore, communication between generations is essential: if parents don’t see it or believe it, they won’t invest as much, undermining the likelihood of a successful transition. In summary, best practices include developing plans with the next generation, communicating regularly and learning to rely on each other, or succession might be imperiled before it starts. Sharing the best practices and helping to educate the next generation is the priority of FELI, it’s in our DNA.”
The business of succession has garnered more attention thanks to the TV show Succession. Does it really get that nasty?
“I do meet families that behave like this, where it becomes a Greek tragedy between parents and next generation members. Our mandate is to ensure that families avoid being caught in a downward spiral. The proper training of the next generation, which includes practices on how to manage conflicts and difficult relationships, is often the much needed resource to correct the trajectory of a family and start long-overdue discussions concerning the next generation’s role in the family and business.
“The difference is, at FELI, we talk to the next generation members as well as the parents. For example, some next generation members express feelings of guilt, such as ‘do I deserve this tremendous wealth I am getting, I didn’t do anything to deserve this.’ Parents don’t ask questions like this or would not think it needs to be addressed. The next generation members are often misunderstood or ignored, instead of involved. We ask them what the issues are, why they are important, because you need to understand the next generation to understand the underlying issues and be able to develop best practices to address these issues. There is sometimes a big disconnect between the two generations and, ultimately, you need two to tango.”
How has COVID-19 impacted family succession?
“COVID has accelerated this transition. Many older business owners want to retire now rather than continue working in a contact environment; the older generations understandably want to protect themselves. The next generation are very technologically prepared and these skills have become essential during the pandemic and for moving forward. This has changed the power balance and brought families closer, helping the the parents realize they took things for granted and sometimes delayed updates to their business and preparations for succession. Plus, a lot of people had anchored down with families, which has brought people closer together and led to families supporting each other even more. Saying that, some have also clashed, but many families became closer, which happens in crisis.”
Why such interest in family business succession?
“My family had an international business. But when my uncle died from a stroke, fighting between various parties ensued; the business was eventually liquidated. There was nothing to guide them when my uncle passed and, suddenly, family members were out of their jobs and not talking. I decided I wanted to understand what happened, so I ended up doing a PhD specializing in family business. There is a lot of compelling research that has been coming out of universities over the last decades underlining the unique challenges of family enterprise. As a society and economy, it’s time to start recognizing this and identifying best practices that can address these challenges to help family businesses stay active and healthy over the long term.”
Along with Peter Jaskiewicz, the Family Legacy Enterprise Institute involves the collaboration of Evelyn Micelotta, the Desmarais Associate Professor in Family Business at Telfer School of Management; Ramzi Fathallah, Assistant Professor of Entrepreneurship and Family Business at Telfer School of Management, Sabine Rau, Visiting Professor at the University of Ottawa, and James Combs, Visiting Professor at the University of Ottawa.
Method of Research
Case study
Subject of Research
People