The Family




The Heart of Family Business

By Robert Lafond, C.R.H.A., M.B.A., Pl. Fin.

The family unit is an integral part of a family business, and this can be a major source of conflict. On the one hand, the successor for the top job is most likely to be a family member, while on the other hand family members’ interests and objectives can be divergent.
 
Often, while the founder is alive and participating in running the company, there is no real transfer of power. This leads to a very difficult transition period. In addition, some heirs have little interest in taking the reins, much to the founder’s chagrin.
 
Other, more ambitious, heirs have a vision for the company that is not always in line with the founder’s vision. Usually, these heirs exert pressure to drive the company from a survival phase to a growth phase, in the process casting aside the founder’s traditional practices.
 
Yet it is the founder who must choose a successor. In many cases, he solves the dilemma by simply picking the eldest child, even if the eldest is not the most able candidate, which can spark rivalry among the heirs.
 
Generally, founders prepare properly for the transfer of equity. This can be done during the founder’s lifetime or, as is more often the case, after death. The division and dilution of equity can give rise to other kinds of conflict among the heirs, since typically some work for the company while others are only shareholders.
 
As a result, the heirs find themselves with different objectives: reinvestment in the company vs. dividend payouts. And even in cases where the company has a board of directors, decisions may still be taken on emotional and sentimental grounds. 
 
The differences in attitudes, personalities, age, education and experience of each family member, and their relationships with one another, make succession a difficult process, crucial for the company’s survival. 
 


 

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