The relationship between family and business creates challenges for succession planning for the family business. The University of Alberta’s Family Business Institute has determined family businesses generate about 60% of Canada’s GDP and create 20% of all new jobs in Canada. Due to the importance to not only the Canadian economy, but also the world economy, extensive research and studies have been done on the family business. These studies have resulted in a 3 Circle Model to identify the relationship between family and business.
Every business contains the ownership and management circle. The family circle adds a unique dimension to the business.
Where a family member falls in the model (Positions 1 – 7) will affect their perspective on the family succession plan. The different perspectives create the potential for conflict. Conflict can be a positive force if handled properly. At the same time, most families have difficulty dealing with conflict. This leads to communication suffering as family members often do not have the tools needed to deal with conflict. A succession plan can look good on paper with the legal and accounting documents to support it. However, it will be doomed to failure if it does not take into account the family dynamics. The plan will have a better chance of success if all family members the plan impacts are informed and given the opportunity to provide input. They may not agree with the eventual plan yet, at the same time, there will be more chance of their accepting the plan.
There are many challenges to these conversations. Conflicting goals (identified by position in the model), conflicting personalities, and sibling rivalry are just a few. Meeting these challenges may be more important than having the plan documented. You should make sure your professional advisors have the skills and experience for identifying the challenges and assisting you in having these difficult conversations. Mediation and collaborative negotiation skills are essential for creating an environment in which all family members can feel comfortable and safe in providing their opinion.
The conversations are difficult and, at the same time, if handled skilfully can be very rewarding. The result will be an effective succession plan and a family business that experiences growth and success as it is passed to the next generation.