by Joanne McPhail, Partner, Specialist in Corporate Commercial Law
There is a funny story about a family patriarch who was advised by one of his VP’s that his son, who worked in the operations unit of his vast company, was not pulling his weight. The father invited the son over for dinner and brought out two hats. He put the first hat on and said, “Patrick, I am sorry to inform you that you are fired from the company.” He then put on the second hat and said, “Son, I have just heard of your termination. I am so sorry. Is there anything I can do to help you?”
I have had a few years of experience under my belt, dealing with all sorts of businesses, and I would say that one of the most challenging is often the family run business. You know, the company that grampa started, and now has been passed down to dad, who has his two kids also working in the business? The difficulty with this sort of business, is that it has this extra layer or nuance, easily recognizable at the dinner table during the holidays.
Sometimes, mixing family and business can work, and sometimes it creates so many undercurrents in everyone’s lives and creates so much stress, that it never really becomes what it could be. If you are involved in a family run business, I would highly recommend a book by Tom Deans called "Every Family's Business". It is an interesting and eye-opening read. Its main topic is succession, which is a pretty important topic given the estimated wealth to be transferred from one generation to the next over the next decade.
A recent survey of Canadian family businesses by KPMG found that although about half the respondents expect a generational transition in the next five years, few have plans or governance structures in place to smooth the handoff. So the issues are challenging and complex and involve legal and accounting matters, as well as issues of valuation and communication. With the family business, maybe even a psychologist! The key is to open up the lines of communication and start talking about it. Find the best advisors to assist with your plans. Ensuring the continued success of the business, as well as the continued bonds of the family, are both very important objectives, and absolutely attainable, with the right mindset. Wearing two hats may make some sense after all!