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Family Business ‘Next Steps’ Requires A Proactive Approach

Home Blog Articles Family Business ‘Next Steps’ Requires A Proactive Approach
Family business and succession advisor speaks on the importance of planning

 

VICTORIA – Renowned family business and succession advisor David C. Bentall, Founder of Next Step Advisors, recently spoke at an event put on by the Canadian Association of Family Enterprise (CAFE) Vancouver Island, to talk about some of the longterm planning challenges facing today’s family companies.

“I’ve seen the best and worst of situations,” says Bentall. “The family enterprise dynamic
is so unique and complex, it’s unlike any other form of business. I grew up in that environment and am very aware of the peaks and valleys that each employee and family member
experiences.

“I feel that the successes I’ve been able to contribute to as an advisor have been a direct result of the challenges we’ve faced over the years as a family in our own business journey. My first experience with succession was very painful as the company ended up going through a major breakup, and it’s motivated me to help others avoid some of the mistakes that were made.”

Bentall was born into a third generation construction and development company, well known for the Downtown Vancouver Bentall Centre, Rogers Arena (formerly GM Place), and the Telus Corporate offices, among many others.

He is also an instructor for Institute of Family Enterprise Advisors, Business Families Foundation, the founding Chair of Business Families Centre UBC, and was involved with the successful domestic bid for the 2010 Winter Olympic Games in Vancouver.

One of the most important challenges Bentall identified was that many companies aren’t sufficiently preparing the next generation to lead. There are a wide-range of causes, from the current generation allowing an environment to develop that’s not conducive to accountability for their children or relatives, a lack of maturity or capacity from the younger generation, or even a lack of motivation from existing leadership to prepare to step aside. “The wisest families have a few things in common that help them manage this process,” he says. “First, they require that the family member work outside of the family business for at least 5 years, and require them to earn one or two promotions within the other organization. This tactic creates a filter ensuring that they take the position seriously and have the ability to contribute in a meaningful way.”

“Second, when the family member does start working, it’s important that they report to non-family managers and be regularly evaluated. By not doing so you can actually rob someone of valuable feedback that leads to growth and improved performance. That concept can also be extended throughout the company with ‘360 performance reviews’, which creates a safe place for all staff to give honest, objective feedback.”

Studies have shown that there are a few strategies that prevent internal conflicts and ensure that everyone is on the same page.

 

Another challenge can be the older generation’s unwillingness, or perceived inability to move out of the way and allow the next one to take over.

“When someone starts a company it’s their baby,” says Bentall. “It’s really important to have empathy for that, this empathy is a gift that the younger generation can give to their elders.

“One that has been established, the older generation needs to be proactive about distancing themselves from day-to day operations, and one of the first things they can do is develop strong leadership teams that have input on the direction and strategy of the company.

“Adding an external board of directors comprised of a majority of independent directors is another effective tactic. Outside objective input is critical in an organization’s development. Following that the current owners need to determine how much capital they want to draw from the business so that they’re not dependent on a salary within the company. Once those things have been determined, they can start developing a plan to transition away from day-to-day operations, and move the next generation into more senior leadership roles.”

Bentall also spoke on issue prevention, and the importance of taking a forward thinking approach to the future of the family business.

“Studies have shown that there are a few strategies that prevent internal conflicts and ensure that everyone is on the same page,” he says. “Regular family meetings are vital, there needs to be a place where each person can feel comfortable to express their concerns without fear of retribution.

“In addition, there needs to be a formalized strategic planning process that ensures that everyone is on the same page, and knows where the company is headed. One of the most destructive habits in family
businesses is the failure to communicate and seek out objective feedback. If you can make sure that it’s not an issue, and give your family and non-family employees opportunities to have their say, you’re going to save a lot of heartache and stress.”