Continuity management in family SMEs


A Major Economic Issue

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

According to the Canadian Association of Family Enterprise (CAFE), 80% of North American companies are family businesses. They produce approximately 50% of Canada’s GNP, and they make up 30% of the Financial Post 500. They pay 50% of all Canadian salaries, and employ 60% of Quebec workers. With these facts in mind, protecting and strengthening SMEs should be a top economic policy priority for governments, with programs to help SMEs achieve long-term viability and protect jobs. 
And yet continuity or succession in family companies is fraught with issues that are seldom managed well. Many experts agree that corporate succession is very different in family companies than in other kinds of enterprise. Not only does it happen less frequently (the expected tenure of a large corporation’s CEO is 10 years), but a change in the CEO of a family company (expected tenure: 30 years) is often a generational change. 
We can also put the problem of succession in family business in perspective with three important observations. First, the challenge of a transition is simultaneously about maintaining growth, passing on power and transferring capital or equity; second, companies must face the personal issues involved in family-firm succession; and lastly, there is a need to plan for the transfer, a final step entailing long, painstaking preparations. 
Armed with these insights, we soon come to understand the importance of using a detailed process to facilitate the transition and safeguard the company’s future. The company head must promote the process, and be committed to following it to the letter. 


The Family

The family unit can be a major source of conflict for a family company. 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.