Almost half of Canada’s family businesses expect to see an intergenerational transfer of management and/or ownership within the next five years, but most (80 percent) have no formal succession plans in place to manage the future expectations, family dynamics of the business or intergenerational wealth.
A recent report from KPMG Enterprise, Family Ties – Canadian Business in the Family Way, developed in cooperation with the Canadian Association of Family Enterprise explores on the opportunities and challenges facing Canadian business families and what it takes to build a successful family business today and prepare for the future.
“Transition of the business from one generation to the next is an area where future business needs and family dynamics do not always align,” says Beverly Johnson, Partner, National Chair, KPMG Enterprise, Centre for Family Business. “The future generation will ultimately decide whether the family business and legacy continues; managing the expectations of potential successors should be on everyone’s agenda.”
Family Ties – Canadian Business in the Family Way solicited the views of both current and future generations of Canadian family businesses. Key findings include:
- The biggest challenge facing future generations is gaining the right experience, skills and business knowledge while overcoming entitlement issues
- Majority of the future generation respondents identified open dialogue, mentorship programs as well as formal training and development as key factors in deciding whether to join the family business
- 90 percent of respondents believe that family business and industry associations play an important role in their success as well as securing the commitment of future generations
- In most family businesses, the current CEO is a family member (93 percent) and is often the majority shareholder (69 percent.) Thirty-eight percent of respondents expect the current CEO to step down within five to 10 years.
- Just 28 percent of family businesses reported having a formal Board of Directors.
Family business is a relatively new field of study and KPMG Enterprise knows that to strengthen the legacy of Canadian family businesses, family business owners need to focus on the following:
- Engage future generations early on – future leaders need to become part of the management team as soon as they have proven their abilities, making them wait can lead to lost opportunities
- Establish clear communication channels – more communication among family members can help ensure everyone involved understands the strategic growth plans of the business and helps to maintain a balance of continued business success and family harmony over the long-term
- Embrace and adopt formal business planning processes – seek professional assistance to undertake a formal business planning process as well as adopt practices to professionalize the business to help business families refine their strategic priorities, keep them in view and ultimately ensure the business has a stronger future
“We know Canadian business families are in good shape and are optimistic about the future,” says Allen Taylor, Chair, Canadian Association of Family Enterprise. “However, the general knowledge and understanding of family businesses in Canada is sparse – this study aims to advance the understanding of family businesses, their current and future owners, and the attributes that equate to their success.”
The full report can be downloaded here. (PDF)