Disruptive events are inevitable. Influential business families have the power of visionary stewardship to help fellow families build resilience.
Voltaire famously said: "History never repeats itself. Mankind always does."
To support the longevity of business families, one of our goals is to ensure family enterprises learn from their mistakes by developing and sharing best practices and the pitfalls to avoid.
Family enterprises generate roughly half of Canada’s private sector GDP or close to $600 billion in trade. Any weakening of this business model would be a blow to our economy.
The biggest threat is maintaining effective leadership over generations, which can be difficult for many reasons. There are best practices every business family should master to increase their chances for successful transitions:
- Shared vision, values and goals, and a well-formulated strategic plan
- Guidelines and a plan for management succession and continuity
- Clear procedures and expectations regarding family participation in the business
- Participation by outside advisors, board members and managers
- Open communication and methods for resolving conflicts
Why? Because even legendary families can fall victim serious problems. The Bronfman family story is a saga of bitter rivalries. “Mr. Sam,” the man who made drinking whisky respectable in the US, built Seagram into the first global liquor empire in the 1950s. After Sam’s death in 1971, his oldest son Edgar turned a small investment in oil made by his father into a 25% stake in the mighty DuPont company.
But in the 1990s, Edgar allowed his second son, Edgar Jr., to indulge his ambition to become a media tycoon. He reinvested the DuPont stake in Universal Pictures, then bought Polygram Records. At the same time, he remained in charge of the liquor business, which started to fall apart. Eventually, the increasingly divided family sold out to the French conglomerate Vivendi. In a rare interview in 2013, Charles Bronfman called the demise of Seagram’s a "disaster" and "family tragedy."
It could have been avoided. Joseph Astrachan, a governance expert who serves on the boards of nine family-owned companies, recommends “productive paranoia” in which business leaders think the unthinkable and look far forward. "Every board should have a committee that systematically and continuously identifies potential risks faced by a company," he counsels.
Talk about risks
Ask tough questions too. How would we react if a threat became real? How many business leaders actually ask themselves this question with deadly seriousness?
Harrison and Wallace McCain were inseparable as they built McCain Foods. Yet in the 1990s a dispute over succession turned nasty. They split as partners for good. Harrison wanted to turn McCain over to outside management when the brothers retired. Wallace wanted his son, Michael, to take over as CEO.
Things went wrong when Wallace unilaterally appointed Michael head of the company’s US operations. "I felt he wasn’t ready and that his appointment made us look bad," Harrison told Maclean’s in 1994. Wallace went ahead with the appointment, setting off a bitter power struggle.
Astrachan points out that many individuals in business, particularly founders or energetic next-gens, can get stuck in a rut. "The rut is, 'Here is what is comfortable for me, and I justify my behaviour by the fact what I am doing seems to be working.'"
There are certain things you need to develop to ensure the business will continue once you are no longer there to oversee it, and to ensure that the family will continue well once you are no longer there to provide the glue or leadership that you provide now.
Eyes wide shut?
How many family enterprises were prepared for a pandemic? We had warnings with SARS and Ebola. Before Covid-19, the medical community warned that it was just a matter of time until a pandemic would cause global chaos. "This was no Black Swan," Astrachan says.
Why do we minimize real threats? How can we make appropriate preparations for future threats? Business transitions are rarely smooth if they are the outcome of an event and not planned as a process.
Like a ship at sea, a family needs not only a good boatswain but a strong, committed crew with a vision. To build that vision, ask your family to answer this powerful question: "Why, for what purpose, and for whom do we want to stay together (in business) for the next x years?"
As we navigate this post-pandemic recovery, families of wealth, banks, advisory firms and policymakers must be even more far sighted. They must recognize the benefits of fostering a strong family enterprise sphere that is resilient to future crises.
By supporting Family Enterprise Foundation’s comprehensive learning portfolio, influential business families can play a pivotal role in educational and economic stewardship, and as meaningful best-practice role models to their fellow Canadian business families.