While the back-stabbing exploits of the fictional Roy clan have captivated millions of fans of TV's Succession, Ottawa researcher Peter Jaskiewicz knows the message at the heart of the critically acclaimed HBO drama rings just as true in real life: family businesses must groom the next generation or risk fading into oblivion.
With studies showing that ownership of more than 60 per cent of family-owned businesses will be changing hands over the next decade, Jaskiewicz, a professor at the University of Ottawa's Telfer School of Management, believes succession planning is more important today than ever.
The director of the university’s Family Enterprise Legacy Institute has devoted much of his working life to studying family-owned enterprises, constantly asking himself the question: why do some succeed while many others fail?
In their new book, Enabling Next Generation Legacies: 35 Questions that Next Generation Members in Enterprising Families Ask, Jaskiewicz and co-author Sabine Rau, a visiting professor at Telfer, explain why it’s vital for the country’s economic health for such businesses to remain in the family.
The economic impact of family-owned enterprises is clear, the researchers say: globally, they employ 60 per cent of the world’s workforce and account for two-thirds of its businesses. Yet Jaskiewicz argues that their challenges are too often overlooked, and many such enterprises fail to receive the support they need to thrive over succeeding generations.
Jaskiewicz recently spoke with OBJ about family businesses, the pitfalls they face and the role of the Family Enterprise Legacy Institute in helping secure their long-term future. The edited transcript that follows is the first in a two-part series on that conversation.
OBJ: What exactly is the role of the Family Enterprise Legacy Institute?
PJ: The idea is to make a difference and help enterprising families. I’m not saying family business, but business families, because families can have various businesses. They are the backbone of our communities, of our economy – the restaurant around the corner or the car dealership, up to national companies. They are, on average, a fairer version of capitalism. For example, when we interviewed prominent businesses following the 2008 financial crisis, we talked to some big (family business) owners in Europe. One of them spoke about the fact that they didn’t fire people even though all their big competitors around the world did. I said, ‘Why?’ They said, ‘Well, if I fired people, the baker wouldn’t send me bread and the priest wouldn’t let me into church on Sunday.’ There’s a lot of truth to that. They live in the same communities as their employees and they have roots.
"These are successful businesses – they create employment, they pay their taxes. The main aspect of this is to help them transition to the next generation."
But even though they are that important, there are very few people taking care of them. Many of them fail at passing on the business and preparing the next generation. These are successful businesses – they create employment, they pay their taxes. The main aspect of this is to help them transition to the next generation.
Most of the few advisers who are around help the senior generation – they talk to the parents. But you always need two to tango. The next generation, they have a lot of options. Few of them want to return to the family business. Of those who return, few are properly prepared and know what they're getting into. You only transition once in life. You might be great at running a business; that doesn’t mean you’re good at managing a family or being able to work with your own kids. We’re trying to fill that void.
OBJ: How are you trying to do that?
PJ: I think we’re doing it in three ways. Talking about business is one thing, but talking about family is so much more personal and private. You’re maybe not proud of having conflict with your brother, or you don’t want to talk about the issues that your son is having. We are creating a safe space – we’re not here to sell things. We’re here to create best practices and to listen – to share the good, the bad and solutions hopefully to the issues they have and share them more broadly.
The second part is we do cutting-edge research. We work with family businesses, but we keep it confidential. We get the data, they give us some trust, we analyze the problems and we create the solutions. It takes a lot of time and effort, but you can only do it when you’re a not-for-profit entity that has the goal of creating general knowledge.
The third part is it’s in our DNA to train and to educate. We hope to pass on the insights we gain to the next generation. Not everyone wants to go to business school, but if you want to take over the family business one day, it wouldn’t hurt to get prepared for it. You need some swimming lessons before somebody throws you into the water.
OBJ: Why is it important to ensure the next generation is prepared to run the business?
PJ: The European Union estimated that every year, 660,000 successful businesses are approaching succession and need to transition to new owners or new leaders, and around 200,000 of them fail. We put all this focus on startups and entrepreneurs, and out of 10, two do really well. Twenty-five years later, maybe they'll be successful, maybe they’re doing well, but now comes the transition, and they don’t know how to deal with that. Many of them eventually shut down. People lose their jobs, taxes are not paid. There will be a gap in services. It is tremendously important to help them. We always focus on starting new businesses, and there’s no doubt that’s important. But the reality is we constantly lose successful businesses because they don’t know how to deal with family dynamics and how to prepare the next generation. This is a big gap and an issue for our economy. It’s a bit like planting trees, but then forgetting to water them along the way.
Today, there’s a lot of opportunities available for the next generation, and many of them would prefer working for Apple in Silicon Valley than running a $20-million tourism operation in Mont Tremblant. That’s the reality. But the next generation is also looking not just for a job to make money, they’re looking for something that has purpose. It’s sometimes difficult for them to imagine that in the family business, where they may have very little influence over what is happening. I think involving the next generation is an opportunity to bring some fresh ideas, but in some cases it also leads to conflict. It’s not so much about readjusting the course of the family business, but it’s a fight across generations about who will be in charge. And then the next generation sometimes decides to do their own thing.