Biggest issues facing Canada’s family businesses

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More than half of Canadian family enterprises are approaching ownership transitions in a historic transfer wave.

Additional research suggests that 40 per cent of the rising generation are likely to leave the family business and start their own venture, rather than being part of a succession plan, according to Family Enterprise Canada (FEC), an organization that supports, educates and brings together Canadian enterprising families, and offers the Family Enterprise Advisor (FEA) designation.

Family enterprises make up approximately two thirds of the country’s private sector firms, contributing $574.6 billion into Canada’s GDP.

With complex issues facing business families – from difficult-to-navigate family dynamics to external political, technological and economic factors – many founding and next generations are uncertain of how to navigate succession and rapidly changing business needs.

FEC is holding a summit on the theme of Disruption and Disruptors Oct. 13-15 in Mont Tremblant, Queb. Here, selected experts who will be speaking at the summit discuss the biggest challenges facing business families.

Naim Ali

CEO, Calgary-based SM2 Capital Partners, and Chair of the Board, Family Enterprise Canada

What are the greatest challenges facing business families in Canada today?

“The single greatest challenge facing business families in Canada is defining their special identity. By the that I mean, answering questions that require reflection and conversation between generations around: What is one’s own identity in the context of one’s own hopes, dreams and concerns? What is one’s own identity vis-à-vis the family structure? What is our family’s identity? What is our business identity? How do the different generations find identity in purpose? How do families help create individual and collective identity?

And then how does this identity factor in the next greatest challenge, which is continuity planning between generations.”

Why are these challenges often difficult for families to communicate about?

“These conversations do not pertain to the tactical and strategic discussions around business. They are not about revenues, expenses, competitive landscapes, financial forecasts, and SWOT analysis. Those are such fun conversations to have in a family business because we have been having them implicitly our whole lives!

The conversation around individual and family identity can be uncomfortable because they require courage to speak one’s truth around their own hopes and dreams. They are uncomfortable conversations because they can affect relationships on a deeper level. And it is always difficult to be in an uncomfortable conversation with family members.

But these conversations help bridge relationships between family members and help define the long-term business strategy for the family. A smart woman once advised me, ‘what does not get talked about, gets acted out.’”

Devin DeCiantis

Managing Partner, New Haven, Conn.-based LGA global family enterprise advisors

What are the greatest challenges facing business families in Canada today?

“Our research suggests that we are entering a new age of elevated uncertainty – one which is unfamiliar to most of us alive today. Family business leaders who have only known political, economic, social, and environmental stability will need a new strategic playbook to survive and thrive in these more turbulent times.”

Why are these challenges often difficult for families to communicate about?

“First and foremost, difficult conversations are often avoided, however essential they may be. Few people enjoy discussing pandemics, wars, recessions, and social tensions – it’s far less exciting than talking about innovation and growth.

Second, these subjects have complex causes and consequences, and setting aside time to understand their implications both for the enterprise and the family takes more time than most have available.

Finally, there is often a distribution of opinions about these issues across a family that makes acknowledging them – let alone addressing them – more of a challenge. Take COVID-19, the invasion of Ukraine, or climate change: Every family likely has a range of opinions and reactions to these issues, which often makes engaging in meaningful and productive dialogue more challenging.”

Why is opening the lines of communication among generations important to family enterprises?

“Despite any natural resistance, mapping, managing and mitigating these risks are table stakes for continuity in this new age of uncertainty. Without a thorough analysis of key internal and external risks, a family’s chances at continuity into the next decade, let alone the next generation, may be significantly compromised.”

Andrew Keyt

CEO, Evanston, Il.-based Generation6 family enterprise advisors

What are the greatest challenges facing business families in Canada today?

“The biggest challenge for family businesses today is dealing with the pace of growth and change in their industries, while keeping the family unified and connected.

The pace of change that we see today is faster than we have seen in previous generations. It used to be that one good business idea could last three generations, now you may need three good business ideas to last one generation.

The family side of this challenge is how do we align around the innovation and change needed to adapt to the speed of the market? What do we hold onto about the past that makes our business unique and special? And what do we need to change in order to meet the strategic challenges of the future?

In succession there is a dynamic tension between the older generation wanting to slow and manage the change and the next generation pushing for new ideas and innovations. The ability of a family to navigate these conversations, value the thoughts and ideas of all of the stakeholders and develop a unified path forward will determine their success in meeting this challenge.”

Why are these challenges often difficult for families to communicate about?

“At the heart of these challenges are personal development and family relationships.

From a personal development perspective, the parents’ generation is often in a life stage (55-70) where they are starting to consolidate their legacy. They aren’t taking the risks that they took when they are younger, they are seeking a level of stability that will sustain them in their later years.

Contrast that with the next generation, who is at a life stage (30-40) where they are trying to make their mark and drive growth, often being the drivers of the innovation that the company will need in order to meet the challenges of the future. They have a much longer runway to recover from mistakes or failures than their parents.

This naturally positions the next generation to be the drivers for change and the parents to resist change.

From a family relationships perspective, it’s very hard for a parent to be objective about their child. There is an inherent power differential between a parent and a child that has to shift as the child becomes an adult, a parent and a professional.

If the parent always sees the next generation as a child, or the next generation always looks to their parents for the answers, it usually means that the next generation hasn’t fully established themselves as an adult in the family system.

The more we can talk as emotionally mature adults, the greater our capacity to meet these challenges.”

Why is opening the lines of communication among generations important to family enterprises?

“The research done by two of my colleagues (Torsten Pieper and Joe Astrachan) has shown that ownership unity and family cohesion sustain families across generations.

Building this unity and cohesion takes great time and effort and cohesion is more of a feeling and experience than something that we measure, like we measure business results.

Unity and cohesion are built very slowly every day by making a commitment to treat family members with love and respect and to build trusting relationships. It is difficult to open lines of communication because doing so requires family members to become vulnerable, and to share, which can be an emotional risk.

This risk is magnified if there are past family conflicts or traumas the family hasn’t discussed or worked through. And the longer we go without talking about these issues, the harder it becomes to discuss. So, committing to building trusting and open relationships and the ability to talk about important issues is vital to the long-term success of any family business.”

James Price and Katrina Barclay

Price: Executive Director at the Telfer School of Management, University of Ottawa

Barclay: Executive Manager, Family Enterprise Legacy Institute at Telfer

What are the greatest challenges facing business families in Canada today?

“From our perspective at the Family Enterprise Legacy Institute (FELI), the issue of succession is the No. 1 challenge facing business families in Canada.

However, we want to dig a bit deeper into that – we see the role of the next generation, and specifically how the Next Gen have been largely excluded from the conversation, as the root of this problem.

How to bridge the gap between generations is such a pressing issue that we’ve built our institute around it. The next generation feels overlooked and unsupported. On the other hand, the senior generation is grappling with uncertainty about the willingness or capabilities of their successors. With so many hundreds of thousands of owners set to retire in the next decade, it’s a perfect storm.”

“We know that enterprising families are a crucial component of the Canadian economy – and our society: 64 per cent of private-sector firms are family-owned, and we know that around 90 per cent of these businesses don’t have a succession plan (or if they have one, don’t follow it).

Succession is a complicated issue, and the process can take many, many years. These challenges are exacerbated by intergenerational disconnections – the next generation feels overlooked, and their questions aren’t being addressed. In research by FELI’s Director Peter Jaskiewicz and visiting professor Sabine Rau, they found that younger members of business families had many concerns and questions that no one was answering. It led to them devoting an entire book to the subject (Enabling Next Generation Legacies).”

Why are these challenges often difficult for families to communicate about?

“Intergenerational disconnections are deeply personal and difficult to talk about. Family dynamics and relationships are inherently more private and sensitive, which makes having open discussions about succession challenging.

There are also differences in perspectives and expectations between generations – the senior generation will often cling to traditions and established ways of doing things, and the younger generation is striving for innovation and modernization.

Making this worse is the reluctance to involve external parties in helping resolve disputes or to help with succession planning. That desire to maintain privacy and autonomy can shut down communication channels and prevent the resolution of underlying issues.”

Why is breaking through that difficulty and opening the lines of communication among all generations so important to family enterprises?

“Running a business is challenging. Being part of a family is complicated. Put these two together and the challenges and difficulties grow exponentially. FELI members recently published a research article about business families and mental health – the systems of family and business are intertwined, and it can lead to greater conflict, greater communication break-down. And then, with the tendency towards privacy, this leads to problems getting swept under the rug.

Overcoming these communication barriers is vital to sustain and nurture family enterprises. Effective communication ensures that the values, expectations, and desires of each generation are acknowledged, respected, and integrated into family matters and into the business strategies and operations.

Even more importantly, better communication empowers the next generation, making them feel valued and motivated to contribute to the family legacy, reinforcing the foundation for a smooth and successful transition. Clear, open dialogue, supported by external advice and education, when needed, can help avert conflicts, foster mutual respect, and maintain cohesion.”

Responses have been lightly edited for clarity and length.

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