Boundaries, not Barriers, in Family Enterprises

In every family enterprise there are three key elements—the business, the family and the owners. These can be viewed as separate circles to help understand the different kinds of relationships in an enterprise and how they overlap. A special environment exists when family members are in business together and it is important that there are boundaries, but not barriers, between these three circles.

I recently spoke with three experts in the field about this:

• Erick Hamdan, former CFO of Leder Holdings;
• Salvatore Corea, a certified financial planner and certified investment management analyst at Sorrell Financial; and
• Nicole Osolinsky, Canada Tax Partner and Leader of KPMG's Family Office, Western Canada practice.

Here are the highlights of our conversation.

Dynamics When Family Members are in Different Places

• There are different levels of activity and ownership. Some family members may be more active in running the business. Some are owners and others are not in that circle. Some people will move between the circles while others will stay in one. This can create some very different points of view between family members.
• The dynamics can depend on what stage a family business is at. The more mature a business, the more complicated things can be. There are the questions about who makes the decisions, when does the next generation become involved in decision-making, what decisions can be made at the business level and which ones require family approval.
• There may be overlapping interests. Some siblings may want to invest capital to expand into another market to put their stamp on the business. Other siblings may see the same investment as meaning more travel and time away from their own young families. The matriarch and patriarch might prefer to use capital for lifestyle assets.
• When the same issue is viewed very differently by family members, people need to step back and look at things from each other's perspective.

Complexities and How to Communicate

• When complexities arise, families need to communicate the right things in the right way and in the right circle. Lines can get blurred between the three circles and there needs to be boundaries. At the same time, there shouldn't be barriers to moving from one circle to the other.
• Rules need to be put in place to communicate and have open discussions about what the family's business objectives are and how to reach them. Setting this up properly at the front end can avoid conflict and misalignment in families. Conversations about business strategy are not well-suited for the dinner table.
• Communicating the why is very important (why decisions were made the way they were, why people were given particular roles). This creates an openness in explaining, listening and expressing concerns.

How to Navigate Complexities

• At the right time in the evolution of a family business, a board should be established with a proper governance framework. This provides some much needed separation when making business decisions, such as where and how to deploy capital. Some families may be hesitant to take this step. In its essence, governance is a process for communication and information sharing to help decision-making.
• Family members need to be mindful of the circle they are in when they make decisions. If they are in the business circle, they have to leave family roles behind and focus on the business decision at hand. Sometimes these are hard decisions. This is not always easy, but it is very important.
• Setting boundaries in a family enterprise can be liberating and create many opportunities. People can better understand where everybody fits and what perspectives they have when they make decisions.

To discuss how Bennett Jones can help navigate the challenges and opportunities of your family enterprise, contact Leah Tolton.