Advising Business Families. Russel Baskin, CEC, FEA February, 2016

Transcription

1 Advising Business Families Russel Baskin, CEC, FEA February, 2016

2 WHO WE ARE

3 The Institute of Family Enterprise Advisors IFEA is a national institute created to assist family enterprise advisors to sustain the highest quality of advising practice We provide individuals and their firms with a comprehensive approach to working with the unique needs of business families We provide unparalleled training, certification, continuing education and the only Family Enterprise Advisor (FEA) designation in the world 3

4 The Institute of Family Enterprise Advisors IFEA is a national membership driven organization We also provide continuing education, networking opportunities, educational resources and a directory of certified advisors We have 300 members and 177 FEA designates across Canada Our University Partners: 4

5 ABOUT FAMILY ENTERPRISE

6 What is a Business Family? Business Family Operating Business Assets (Family Business(es)) Financial Assets Real Estate Assets Philanthropic Assets Heirloom Assets 89.4% of business families control more than a single firm The mean number of firms controlled by the family is 3.4 firms (Zellweger et al., 2010). 6

7 Fast Facts one in five have a succession plan in place for all senior rolls Canadian family businesses grew 67% In % have no succession plan in place at all 70 percentage of new jobs created by family businesses annually in Canada 60% approximate percentage of Canada s GDP generated by family businesses 80% percentage of all businesses world wide are owned by families 60% have next-gen working in the business 53% Plan to pass management on to the next gen 4.7 number in millions of people employed full time by family businesses in Canada Source: Campden FB Issue 64 7

8 Largest & Oldest Family Enterprise Cargill ($ 125 billion revenue): the largest private family enterprise Wal-Mart ($ 447 billion revenue): the largest public family enterprise Houshi Onsen (the 46 th generation): the oldest family enterprise 8

9 Canadian Family Businesses Wealthiest Canadian families in business Source: Canadian Business 2012

10 Performance of FBs versus NFBs? ROA= Return on assets; TSR= Total shareholder returns Source: Miller, D. & Le Breton-Miller, I. (2005). Managing for the long run. Boston: Harvard Business School Press. 10

11 CHALLENGES IN FAMILY ENTERPRISES

12 Challenges of Family Enterprises John L. Ward s 6 Biggest Challenges 1. Maturing business life cycles and increasing competition 2. Limited capital to fund both family needs and business growth needs 3. Weak next-generation business leadership 4. Entrepreneurial leadership s inflexibility and resistance to change Peter Leach s Four Challenges 1. Lack of communication (conflict) 2. Family members employment in the business (Merits VS Entitlement) 3. Business transition to next generation (Succession) 4. Manage change in both the family and the business (changes) 5. Conflicts among sibling successors 6. Disparate family goals, values, and needs Source: 1.Growing the family business: special challenges and best practices. John L. Ward, Family Business Review, (1997), 10(4) ; 2. Family Business Rulebook, 2008, Peter Leach. 12

13 Generation Patterns Family Rules Sibling Dynamics Roles Family Dynamics

14 STEP Survey Conclusions Greatest challenges are nontechnical, people based issues Skills beyond professional qualifications are required in order to be effective Team playing can deliver better value for clients. Source: Business owners warn of lack of soft-skills among family business advisors, Society of Trust and Estate Practitioners,

15 Characteristics of Healthy Family Enterprises Healthy Family Businesses Communications are open and clear Family has the ability to resolve conflicts High trust between family members Goals and values of the family are clear Boundaries between family and business are clear Succession is planned early Functioning independent board of directors Source: Jane Hilburt-Davis et al., Consulting to Family Business, Pfeiffer 16

16 THE FAMILY ENTERPRISE AS A SYSTEM 17

17 The Family Enterprise as a System A system is a network of interdependent components that work together to try to accomplish the aim of the system. - Dr. W. E. Deming 18

18 The Family Enterprise System Different family members may stand in different circles Family members in different circles may have different perspectives towards the same issue Management of different perspectives is essential! Family Ownership 3 Business 2 19

19 The Family Enterprise Paradox: The Three-Circle Model Ownership Management Marketability Information Profit Family Private Traditional Emotional Accepting Wealth/Business Public Competitive Changing Data-based Source: Tagiuri, R., & Davis, J. A. (1996). Bivalent attributes of the family firm. Family Business Review, 9, (Reprinted from Working paper, 1982, Cambridge, MA: Harvard Business School) 20

20 Conflict Comes with the Territory Family Inward looking Emotion based Unconditional acceptance Lifetime membership Strive for stability Business Outward looking Task/function based Rewards performance Perform or leave Embrace growth and change

21 Boundaries can Clarify Differences between Family and Business 22

22 How Does a Family Entrepreneur Decide Which Hat to Wear? Is this a family decision or a business decision? Source: Ellen Frankenberg, Your Family Inc. Practical Steps for building a healthy family business. 23

23 Whole Systems Perspective: Working with Complexity Strategic advisors work with the whole system. Complexity occurs at the boundaries between the three systems. Ownership Family Business 24

24 TAKING A MULTI- PROFESSIONAL APPROACH

25 The Traditional Approach Lawyer Non- Family Executive Accountant Recruiter Insurance/ Estate Planner Family Enterprise Independent Directors Wealth Manager Facilitator Family Therapist Banker 26

26 Single-System Approach Ownership Governance etc. Family Relationship etc. Ownership Lawyers Accountants Estate Planers Wealth Advisors Insurance Agents Business strategic planning Sales and marketing Business operations Family Mediators Counselors Therapists Family Facilitators Business Accountants Consultants Human Resource Professionals Source: Jane Hilburt-Davis & W. Gibb Dyer, Jr. Consulting to Family Businesses

27 Single-System Approach Ownership Governance etc. Family Relationship etc. Ownership Lawyers Accountants Estate Planers Wealth Advisors Insurance Agents Business strategic planning Sales and marketing Business operations Family Mediators Counselors Therapists Family Facilitators Business Accountants Consultants Human Resource Professionals Source: Jane Hilburt-Davis & W. Gibb Dyer, Jr. Consulting to Family Businesses

28 Single-System Approach Ownership Governance etc. Family Relationship etc. Ownership Lawyers Accountants Estate Planers Wealth Advisors Insurance Agents Business strategic planning Sales and marketing Business operations Family Mediators Counselors Therapists Family Facilitators Business Accountants Consultants Human Resource Professionals Source: Jane Hilburt-Davis & W. Gibb Dyer, Jr. Consulting to Family Businesses

29 Single-System Approach 30

30 Every action creates a non-linear reaction; like a ripple in a pond. 31

31 Who is your client? Lawyer Non-Family Executive Accountant Recruiter Independent Directors Who is your client? Insurance/ Estate Planner Wealth Manager Facilitator Family Therapist Banker 32

32 The Multi-Professional Approach Lawyer Non-Family Executive Accountant Recruiter Insurance/ Estate Planner Family Enterprise Independent Directors Wealth Manager Facilitator Family Therapist Banker 33

33 Formula One Pit Stops 34

34 Multi-Disciplinary Approach This is why multi-disciplinary consulting teams should often be the rule, rather than the exception in working with family businesses, as no single person is likely to have all the content and process knowledge needed. -Hilburt-Davis & Dyer,

35 Resources Canadian Association of Family Enterprises (CAFE) Alberta Business Families Institute (ABFI) Institute of Family Enterprise Advisors (IFEA) Business Families Foundation (BFF) Family Firm Institute (FFI) Purposeful Planning Institute (PPI)

36 THANK YOU! Be fluent in family enterprise