Family businesses are often a testament to the entrepreneurial spirit, shared values, and commitment to their legacy. Many families take pride in their entrepreneurial heritage, which has guided their success across generations. Given that family members are likely to work together toward the same legacy vision, keeping the business in the family may seem like a natural and easy choice.
Underneath this seemingly idyllic surface, family businesses must face a critical question:
Can our family dynamics withstand the realities of running a business together, or are we risking both our enterprise and our relationships by maintaining the status quo?
This question is one we’ve seen families grapple with time and again. We’ve seen how the pressure to uphold a family legacy can stifle innovation and how unaddressed issues can paralyze decision-making. Fortunately, we’ve also witnessed how family dynamics can drive remarkable success and resilience. On one hand, the desire to honour tradition and preserve what has worked in the past can sometimes lead to a reluctance to embrace change or new opportunities. This can potentially hinder a company’s ability to adapt to evolving markets.
However, it’s equally important to recognize that family businesses often benefit from a unique long-term perspective and shared values. The deep understanding of the business that comes from growing up within it can lead to insightful innovations that outsiders might miss. Additionally, the trust and familiarity among family members can sometimes enable rapid, decisive action when opportunities arise.
In essence, the key lies in recognizing both the potential pitfalls and the inherent strengths of the family business model and developing governance structures that maximize the benefits while mitigating the risks.
Navigating Unspoken Tensions in Family Businesses
In family businesses, one challenge is how different family members often have personal objectives and values that may be in conflict with the business goals. As the family unit grows and evolves, each member develops their own unique personality, interests, and pursuits. Some feel a strong connection to the family business, aspiring to contribute to its success. Others, however, yearn for different paths altogether.
These differing aspirations can lead to interpersonal conflicts and power struggles within the family. Siblings vie for leadership roles, while cousins may clash over business direction and strategy. Generational gaps exacerbate tensions—the younger generation seeks innovation and adaptation, while the older generation may resist change, not to mention the differences that may arise in social causes to support through their family philanthropy.
Moreover, the weight of expectations placed on family members can be overwhelming. Balancing the legacy of previous generations, maintaining family harmony, and ensuring business success take a toll on individual well-being and relationships. The fear of disappointing family or being perceived as the “weak link” adds stress, anxiety, and resentment.
The Vital Role of Family Governance in Ensuring Continuity
Family governance serves as a structured framework for decision-making, conflict resolution, and accountability within family businesses. By navigating challenges and maintaining alignment between family and business interests, effective governance plays a pivotal role in sustaining continuity.
Family governance is fundamentally about the establishment of clear rules, roles, and processes that govern the involvement of family members in the business. These elements include:
- Rights and Responsibilities: Clearly defining the rights and responsibilities of family members ensures transparency and equitable treatment.
- Employment Criteria: Setting criteria for employment and advancement within the company promotes merit-based decisions.
- Dispute Resolution Mechanisms: Establishing effective mechanisms for resolving disputes ensures smoother operations.
Moreover, a well-established governance framework helps to align the interests of the family with those of the business. This ensures decisions are made with the long-term success of the enterprise in mind. This alignment is critical for building a culture of stewardship where family members view themselves as stewards of family wealth committed to preserving the business legacy.
Family Council: The Cornerstone of Family Governance
The family council is the central component of successful family governance. This key governing body serves as the primary link between the family and the business, representing the interests of all family members and ensuring that their voices are heard in the decision-making process.
The composition of the family council should reflect the diversity of the family, with representatives from different generations, branches, and levels of involvement in the business. This inclusive approach helps to build trust and foster a sense of shared ownership and responsibility among family members.
The family council’s primary responsibilities include overseeing the implementation of the family constitution and other governance policies and providing guidance and support to family members as they navigate their roles within the enterprise. To effectively fulfill these duties, family council members must be well-equipped with the knowledge, skills, and resources. In addition to its operational responsibilities, organizing educational programs, mentoring initiatives, and leadership development activities can help prepare the rising generation. This commitment to ongoing education and development is essential for ensuring that the family remains adaptable, resilient, and well-positioned for the challenges and opportunities that lie ahead.
Ultimately, to ensure family business continuity, there must be a way for ongoing reflection, adaptation, and growth. Effective governance provides the structure, processes, and accountability needed to align family and business interests and resolve conflicts. Staying together in business isn’t a one-time decision. It’s an ongoing commitment that requires careful nurturing and unwavering dedication from all family members to thrive personally and professionally.
ABOUT THE AUTHOR
As the Senior Wealth Advisor at Beacon Family Office at Assante, Cory Gagnon has supported successful family enterprises to preserve, protect and transition their wealth since 2011.
Cory’s personal objective as a Wealth Advisor is simple. He is committed to supporting families to take control of the areas of their lives that truly matter to them. This commitment revolves around using specific tools and strategies that enable families to take action with confidence which will support them through life’s critical transitions.
ABOUT THE AUTHOR
As the Senior Wealth Advisor at Beacon Family Office at Assante, Cory Gagnon has supported successful family enterprises to preserve, protect and transition their wealth since 2011.
Cory’s personal objective as a Wealth Advisor is simple. He is committed to supporting families to take control of the areas of their lives that truly matter to them. This commitment revolves around using specific tools and strategies that enable families to take action with confidence which will support them through life’s critical transitions.
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Beacon Family Office at
Assante Financial Management Ltd.
Suite 519, 10333 Southport Road S.W.,
Calgary, AB T2W 3X6
