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With an estimated 60 per centcontribution to the GDP, fam-ily businesses are a vital cor-

nerstone of Canada’s economy. Theygenerate job growth, make significantphilanthropic contributions and con-tinue to outperform their non-familybusiness counterparts on many pa-rameters. Yet in the coming decade, ahigh number of family enterprises facea significant challenge when Canada’sboomer retires.

In family businesses, there’s typi-cally a strong desire to pass the reinsto the next generation to continue thelegacy, yet this transition can only besuccessful when incoming leaders arecapable and willing, says Allen Taylor,chair of the Family Enterprise Xchange(FEX). “The next generation brings itsown set of values, hopes and dreams,which may not always be alignedwith the expectations for a traditionalsuccession.”

in family enterprises. In traditionalsuccession, the ownership goes to ayounger family member, who takescontrol of the direction of the business.Alternatively, these family memberscan become owners without beingdirectly involved in the operation ofthe business. A third option – and onethat is increasingly in the spotlight – isintrapreneurship.

The intrapreneurial model allowsyounger family members to leveragethe family enterprise’s institutionalexpertise for building a separate busi-ness, explains Mr. Taylor.

It also opens a new channel forintergenerational dialogue, be-lieves Guillaume Hervé, president ofG3point0 Consulting. “Studies showthat the large majority of millenni-als are not interested in entering thefamily business, but that doesn’tmean they are not business minded,”

While three out of 10 family businessessurvive into the second generation,only one out of 10 are handed downto the third.

Mr. Taylor sees several avenuesfor involving next-generation leaders

The pitfalls of generational transi-tions are not new, Mr. Taylor explains.The common notion – that the firstgeneration builds the wealth, the sec-ond sustains it and the third loses it – isbased on a well-documented cycle.

FAMILY BUSINESS

INSIDE

ABOUT

The Family Enterprise Xchange (FEX) is a national organizationwith the goalto empower family enterprises and their advisers so they can succeed andflourish. To achieve this, FEX provides business families and their adviserswith a unique blend of shared wisdom and experience, and the world’sbest, leading-edge thinking and knowledge.

For more information, visit family-enterprise-xchange.com.

Plan early and seek qualified help to ensure long-term success

John Firstbrook is a man with amission – to alert those in familybusinesses about the statistics of

those who fail to plan ahead – and hemeanswell ahead. The Family BusinessInstitute, for instance, has found thatjust 30 per cent of family businesses aresuccessfully passed on to the secondgeneration and beyond.The Firstbrook Insurance Group

specializes in providing leading-edgeconcepts combinedwith life insuranceproducts tomitigate tax liabilities. Thereal challenge is implementing awork-able plan for all stakeholders.The company’s typical client is in

the mid to late 50s – with childrenin their teens to early 30s – who hasyet to transition the business to thenext generation. While many found-ers take comfort in the fact that theirbusinesses are highly successful inthe present, they may overlook onecritical need – to look ahead and planfor succession of the company intoother hands.

Experts agree that one of the firstprinciples for successful continuityplanning is to allow a lot of time forfrank discussions around the futuredirection to unfold.

“The earlier you start to plan a tran-sition, the more options you have,”saysMr. Firstbrook, president and CEOof Firstbrook Insurance Group. Thework includes the founder thinkingabout the education and experiencethe next generation will need totake leadership of the business, be itstudying for an MBA or even workingfor a competitor to better understandthe industry the family business is in.Firstbrook Insurance Group’s great-

est value to a family contemplatingbusiness succession planning is act-ing as a catalyst to bring the requiredexperts together to “get to the truth”and to build consensus. That truthincludes understanding whether thefamily members can get along wellenough to be in business together oreven if they have the interest to stay

in that business.Over the last 30 years plus, Mr.

Firstbrook has seen a lot in the succes-sion planning business. As noted, hisadvice is to start early and seek helpby well-qualified advisers. The resultsare compelling for the business and,most importantly, the family.Thinking back a number of years

ago, Mr. Firstbrook remembers aconversation he had with a success-ful Canadian entrepreneur, asking,“At what point did you start to thinkabout your planning?” The responsewas surprising: “The day I started thebusiness,” the entrepreneur said. “Inthe early days, the goal was to takerisk off the table. We purchased a lotof term insurance, which bought us

the time to become successful.”Years later, the businessman said

that premiums started to go up, and heconverted the term insurance towholelife. The result was that he stabilizedhis costs. The end game, of course,was to protect the taxes he owed totransfer the business. The company isnow secure with the next generation.“This clearly demonstrates planning

is a marathon, not a 100-yard dash,”says Mr. Firstbrook.

PLANNING

“The earlier you start toplan a transition the moreoptions you have.”

John Firstbrookis president and CEO of FirstbrookInsurance Group

“Intrapreneurship givesmembers of the nextgeneration the means toprove their business senseand leadership capabilities.”

Guillaume Hervéis president of G3point0 Consulting

This content was produced by RandallAnthony Communications, in partnershipwith The Globe and Mail’s advertisingdepartment. The Globe’s editorial

department was not involved in its creation.

Harnessing themultigenerational advantage

All-in-one solution for business families’ needs. FB 2How to balance business, ownership and family. FB 3

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When it comes to family business,it’s important to understand thedifference between the boardroomtable and the kitchen table.

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FAMILY BUSINESS

CONSOLIDATION

Centralized approach aims to better servebusiness families’ complex needs

For family business owners, de-termining how to pass on thesignificant wealth they’ve creat-

ed can be a daunting prospect. Thereare many issues to consider – fromfamily dynamics to succession plan-ning and transferring wealth to thenext generation. Addressing thesematters can be highly emotional, withfamilymembers often having compet-ing ideas about the desired outcome.

The best way to maintain familyharmony throughout this process isto have “big and deep conversa-tions,” says Andrew Marsh, CEO ofRichardson GMP, Canada’s largestindependent wealth managementfirm, with over $29-billion in assets.The firm is also the parent of Canada’sonly nationally branded family officegroup dedicated to serving affluentfamilies and entrepreneurs.

These conversations require step-ping back from a narrow focus on in-

vestments to exploring what wealthmeans to a family and how it can betransitioned to the next generation.The values that emerge from theseconversations then point to strate-gies to grow and steward the wealth,informing decisions about successionplanning, investing, philanthropicgiving and more.

That’s where Mr. Marsh says theintegrated and centralized approachoffered by Richardson GMP PrivateFamily Office makes a crucial differ-ence. Many entrepreneurial families,he says, have collected a disparateteam of advisers over the years asthey have built their business, seek-ing advice from various tax planners,investment advisers, lawyers, estateplanners and accountants.

“While this approach may workwhile you’re growing a business,its fragmented nature doesn’t allowhigh-net-worth families to see the big

picture when it comes to addressingthe many intersections of businessand family,” says Mr. Marsh.

What’s required, he says, is a “one-place, one-team, one-call solution.”This integrated approach – whereone firm brings together a unifiedteam of experts in tax, law, familydynamics, accounting and investing– enables the family to benefit froma co-ordinated strategy overseen byan objective family office team.

The recommended strategy willbe as unique as each family, but inall cases it is based on a rigorousprocess that engages families inexplorations of their personal, familyand business values and goals.

“Our processes and tools helpfamilies mitigate the risk of dysfunc-tion and mismanagement of wealthand intergenerational businesses,”says Mr. Marsh. These processesrange from guiding individuals

through formal family meetings tohelping them identify their familymission and values, and discussingthe many different ways of leavinga legacy. Richardson GMP PrivateFamily Office also advises on strate-gies for business succession, whichcan be a difficult issue dependingon whether the next generation isinterested in and capable of takingover the business.

For Mr. Marsh and his team ofcertified family enterprise advisers,the primary goal is to help wealthyfamily business owners understandthe importance of expanding the con-versation to something broader thanjust investment management. “Ourprocesses guide families throughthe deeper and more fundamentalquestions, and our integrated team ofadvisers can put structures in place tosuccessfully steward a family’s wealthfor succeeding generations.”

“While [seeking advicefrom various advisers] maywork while you’re growinga business, its fragmentednature doesn’t allow high-net-worth families to see thebig picture when it comesto addressing the manyintersections of businessand family.”

Andrew Marshis CEO of Richardson GMP

“The success of familybusinesses, and whetherthey can sustainthemselves, can have asignificant impact on theoutcomes for Canada in thenear future.”

Allen Tayloris chair of the Family EnterpriseXchange

he says. “Kids who grow up in anentrepreneurial environment tend tobe entrepreneurial themselves, butthey often look for outside avenuesto quench that entrepreneurial thirst.”

So why not channel this desireinto something that can fulfill theirdreams and benefit the family’s corebusiness at the same time, asks Mr.Hervé, who is the author of Winningat Intrapreneurship.

There are many proven benefits ofintrapreneurship thatwork in favour offamily enterprises, he says. “Differentgenerations partnering on a real busi-ness initiative get to appreciate whateach brings to the table. And whenyou talk about succession, it’s alwaysa challenge to create a merit-basedsuccession plan versus one based onentitlement. Intrapreneurship givesmembers of the next generation the

means to prove their business senseand leadership capabilities.”

While the older generation has achance to see their collaborators andpotential successors in action, theyounger partners benefit from fam-ily support, which goes far beyondproviding seedmoney, he adds. “Withintrapreneurship, you leverage thecore business by taking advantageof the abilities, resources, supportand networks that can help the newbusiness grow faster than a purelyentrepreneurial counterpart would.”

In addition, family support typicallycomes with less aggressive expecta-tions for seeing quick results comparedto outside investors.

Younger generations can also actas effective change agents at a timewhen many companies struggle withorganic growth, says Mr. Hervé. “Fam-

ily enterprises are generally so focusedon their core business, and onmakingincremental improvements to eithertheir offerings or their cost, that theymay miss the bigger picture, whichcan include diversification, innovationor new markets.”

Mr. Taylor adds that some of themost successful family enterpriseshave used an intrapreneurial-like ap-proach for diversification and increas-ing their market reach. “There aremany examples where the assets of acore business were leveraged to growthe company,” he says. “Intrapreneur-ship draws on the various strengths ofa family enterprise to develop a strat-egy that speaks to the values of next-generation leaders and their desire tobuild something for themselves.”

But regardless of the way in whichnew leaders become involved, having

a strategy is key for sustaining a busi-ness for more than one generation,says Mr. Taylor. “Business families areoften forced into crisis managementby an event, such as the founder’sdeteriorating health or death. This typi-cally reduces their number of options.”

The awareness that long-term plan-ning is core to business success iswhat differentiates successful familyenterprises, he believes. “The costsof dealing with adverse outcomesare substantially higher than the costof doing the right thing,” says Mr.Taylor, who advocates for a proactiveapproach and sound family businessplanning.

“The success of family businesses,and whether they can sustain them-selves, can have a significant impacton the outcomes for Canada in thenear future,” he adds.

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If you are part of a family enterprise, an advisor to family enterprise,or simply interested in the field, you are encouraged to attend thefirst annual Family Enterprise Xchange Symposium, conducted bythe Family Enterprise Xchange (FEX), a new organization dedicatedto empowering business families and their advisors for success.

Join us at the Family Enterprise Xchange SymposiumJune 12-14, 2017 • Halifax, N.S.

STRATEGY

Three-circle model balances business,ownership and family interests

Expressing ideas, thoughts orconcerns in the workplace canbe challenging and intimidat-

ing in any scenario, and when theleadership team is comprised of one’sparent or other family members, anadditional level of complexity oftensurfaces, says Tracey Zehl, a partnerwith Grant Thornton LLP in Calgary.“Dealing with family members tendsto come with strong emotions. Attimes, people stay quiet becausethey do not want to upset the familyor do not feel empowered to share.However, when someone is part ofthe business strategy, his or her voiceneeds to be heard.”

A lack of alignment can have seri-ous implications for business out-comes, cautions Ms. Zehl. “In oneexample, we found that while every-one agreed on the goal to grow thebusiness, the family members whowere active in the business and keyemployees each had a different defini-tion of growth. Without this commonvision and the strategy to achievethe vision, everyone was rowing theboat, but not necessarily in the samedirection.”

As a result, a lot of effort was spenton dealing with internal dynamics,says Ms. Zehl. “The goal should be toeliminate barriers and allow everyoneto have a voice. The point is not to

Generation XRoberto VillamarChief Strategy Officer and BusinessDevelopment Manager Canada, COHECO

When I reflect on my career, a few ele-ments stand out as crucial: first, I didn’tstartworkingwith the family enterpriseright away andonly joined after gainingoutside experience. And I am the typeof person who will look for a positiveperspective of every person, situationor challenge. I always try to identify theroot of an issue first, leaving emotionsaside as much as possible. Finally, Ilove learning, planning and workingwith people.

When dealing with business andnon-business issues duringmy 18 yearsat the family business, there have beenmany times, even now, when I feelmy voice is not fully heard. While I’vegained strong leadership capabilities,with daily examples and results, I stillface challenges when I promote a newchange: it feels like starting all overagain. Perseverance is key.

A big challenge that Gen-Xers faceis being in the middle of two stronggenerations calling for attention: babyboomers and millennials. When itcomes to our view of work and long-term objectives, I personally believewe have a lot in common with oldergenerations,which generates a percep-tion from younger people that we aremore aligned with boomers. But theolder generations might identify uscloser to millennials, leading to a riskof inadvertence.

I’m currently studying to becomean adviser for family enterprises andbelieve that “family-ness” is a keystrategic component for business suc-cess, but new structures and openconversations across generations canmake a big difference.

Generation XKaren LapradeFounder and CEO at LEAD

Often, the founding generation resistsnew ideas with the question: “Whywould we change something thatwe have always done this way?”Instead of calling for rapid change,a less threatening approach with along-term view would be for therising generation to propose invest-ment in the future by uncoveringvalues. Tremendous opportunitycomes from an assessment of valuesgetting to the heart of whatmotivateseach individual. When the differentgenerations do this work, they cansee where their values conflict andconverge, allowing them to moveforwardwith new insight. Theymightuncover areaswhere they require sup-port or need to develop new skills orbring in someone external. Startingfrom a foundation of values is a stra-tegic move, ensuring a better culturalfit and positioning the enterprise forsustainable growth.

On the other hand, the interplaybetween the possibility of choiceand the reality of failure makes livingwithin a family enterprise difficult,which weighs heavily on the risinggeneration. Here again, values-basedconversations about what being anenterprising family means will helpcreate a compass for shared decision-making. It’s critical to remember thata family enterprise is a communityof people – a place where all feelnourished and heard.

focus on who made the comment,but to have all the ideas expressedand focus on the underlying themesto identify a path for moving forwardin a productive way.”

A useful catalyst for understandingthe complexity of family businessesis the three-circle model, accord-ing to Ms. Zehl. “We look at threecircles: family, business and owner-ship. Often, when family businessesare working through issues, they arefocused on a particular dimensionof the model and fail to see howthese scenarios often impact all threecircles.”

Advising family businesses oftenrequires a whole system approach,says Roger Cooper, a partner withGrant Thornton LLP in St. John’s.“Rather than looking at the businesscircle in isolation, it can be helpful tolook at the strategies for family, busi-ness and ownership together, withparticular focus on the areas wherethe three circles intersect.”

While a strong focus on the busi-ness allows leaders to be very ef-fective in that area, it may preventthem from considering the biggerperspective, says Ms. Zehl, whoutilizes a proactive approach in deal-ing with these important issues.She notes that when there are cleardefinitions of roles, expectations and

compensation for family members,plus a pathway and requirements foradvancing within the organizationthat are defined at the onset, it canprevent some future friction betweenthe family, business and ownershipcircles.

“If there is a dispute or breakdown,having a contract, agreement orsome sort of physical paperworkthat defines the steps to be taken thatwere agreed upon at the onset whenthe relationship was friendly can beextremely helpful. It can be importantto have this document in place beforecritical issues arise,” says Ms. Zehl.“People say, ‘Oh, they’re family,

they’ll work it out,’ but unfortunately,situations can escalate. I have seen ittear families apart.”

Family enterprises of all sizes andin various stages of their life cyclecan benefit from external advisers,who can help identify the underlyingissues and concerns in a safe environ-ment where everyone can be heard,suggests Ms. Zehl.

Mr. Cooper adds, “Bringing to-gether a multidisciplinary team withfamiliarity with the business as wellas the family, who act as that sound-ing board for critical decisions, canbe valuable and lead to much betteradvice for the family.”

“Dealing with familymembers tends to comewith strong emotions. Attimes, people stay quietbecause they do not wantto upset the family or donot feel empowered toshare. However, whensomeone is part of thebusiness strategy, his or hervoice needs to be heard.”

Tracey Zehlis a partner with Grant Thornton LLP

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Family enterprises of all sizes can benefit from external advisers, who canhelp to identify the underlying issues and concerns. ISTOCKPHOTO.COM

MillennialsEmma O’DwyerVP Market Development,The Matcom Group

The main challenge to family busi-nesses in today’s world is how tofinancially manage the transition ofthe business in order that the currentgeneration can retire comfortably andthe next can continue to grow it andmaintain the family’s investment.

The cost of living today is high(and still rising), so the older genera-tion often does not want to leave thebusiness or take more financial risks,thus delaying the transition process.As well, financial institutions have be-come increasingly risk averse and arereluctant to partner in the family busi-ness transition process. Governmentregulations and taxation changeshave also made passing a companyto the next generation more difficultthan in the past. In most cases, a bet-ter “wealth” decision would be to sellinstead of keeping the business in thefamily, but this is rarely the final objec-tive when starting a family business.

Without a financial partner to helpbridge the transition, the old guardtends to stay in control longer thanwould previously have been thecase. Members of the next genera-tion find themselves with the stressof managing the business but noneof the strategic power to run it howthey envision or plan for continuedgrowth.

It is crucial to plan ahead for thegenerational transition. The time tobegin planning is when the businessis first started and to keep tweakingit as time goes on. Most importantly,change the plan or cash strategies toensure they fit with current regula-tions and realities.

MillennialsDeena ChochinovFamily Enterprise Adviser

Because of their high energy, en-thusiasm and zeal for making – andseeing – a difference, millennials cansometimes be impatient. They canbecome easily frustrated with whatthey see as a “turtle-like speed of bu-reaucracy,” outdatedbusiness practicesand resistance to technology. They area generation thatwants to be includedin, collaborated with and participating– they typically want to jump into thebusiness with both feet.

How can these attributes best beharnessed for strengthening familybusinesses? By involvingmillennials infoundational discussions about sharedvisions, goals and values.

Millennials can also grow their finan-cial literacy and competency and buildtheir “business capacity” by askingfor challenging and interesting assign-ments, such as short- ormedium-termspecial projects that expand theirknowledge of the business and in-crease their depth of experience. Theytend to do well when they considertheir parents andgrandparents as “wis-domkeepers” of the family enterprise,and rely on themas respected coaches,mentors and guides.

Increased engagement and trans-parency can shape the rising gen-eration’s positive views of the familybusiness and increase their commit-ment to actively participate. Opencommunication about continuity andsuccession planning is amust betweenthe generations, and leaders needto understand that they should passthe baton not when they are ready toleave but when their successors areready to lead.

How to turn generational differences into assets that enable business success and continuity?We asked the experts.

BoomersSusan St. AmandFounder and President of Sirius FinancialServices

When generations aren’t speakingthe same language or don’t havesimilar exposure to key influences, itis difficult to share the same perspec-tive and agree on common values.Boomers may feel that family values,memories and the historical contextof challenges and success don’t re-ceive the deserved attention, but it’simportant to stay focused on sharedvalues. The biggest challenge is oftento encourage different generations toopenly share their views and respecteach other’s perspectives.

At a time when there are moreintegrated families from multiplemarriages as well as changes withinsexual orientations and multijurisdic-tional residences, families may needto revisit and confirm their valuesagainst a changing general socialfabric. Boomers can find it difficult totransition from the role of a parent tothat of a mentor, but they need to al-low the next generation to challengethe conventional and be prepared toaccept the consequences.

The accelerated pace in businesscan impact a family’s ability to for-mulate long-term goals and commu-nicate them to the next generation.

For boomers, it’s important to beopen to evolution, accept differencesand nourish a vision of the future.Diversity of voice and opinion is oftena key element to tackling today’schallenges, and leading by examplewill gain the respect of all youngergenerations.

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