How to keep family from fraying at seams: 'Start at the stroller'

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When Danielle Saputo was a child, her extended family members would regularly convene in the garden where they lived in a semi-circle of four houses.

“On Sundays we gathered at my grandparents’ home,” recalls Saputo. “For us, first and foremost, family came first. There was value in coming together to celebrate a graduation or a birthday. There was always a reason to enjoy each other’s company.

“I would like to think that that is one of the ingredients of our success.”

Today, Quebec’s Saputo family is one of the wealthiest in Canada, a household name around the world for the dairy processing empire started by Giuseppe Saputo in 1954. But they also show how a wealthy family can stay together and function at a high level through cohesion, shared values and purpose.

Cohesion should be emphasized early and continue through adulthood, says Saputo, who today is a family advisor and coach. That goes for family members who aren’t involved in the business, too; everyone should be heard, without bias, and feel like their aspirations are supported.

Today, however, parents and wealth-makers tend to ask that question a little too late, she says. If they’ve managed to defy the adage that family wealth is blown by the third generation, it’s because the family established a unified vision that “started at the stroller,” as she puts it.

But that’s not easy, especially in the early days, when the wealth is being created and the hours are long.

“Very often, these individuals who’ve created the empire are so busy working, and not always present, and that’s often where that gap is created and this sense of belonging to the family can be lost,” says Saputo.

All eyes on governance

Ed Giacomelli, senior advisor and Canadian market expert for Family Office Exchange, says that families are increasingly realizing they need to be prepared, particularly when they see other families experiencing conflict through the media.

“I’m meeting families, business owners, who read about families having these problems, and they are asking, ‘How do I avoid that happening to my family?’

“They say, ‘I know today that I will amass wealth greater than my family will ever spend, so what do I have to do for my children so they are ready for that responsibility and the burden that comes with it? How do I keep them motivated so they can achieve what they want out of life independent of this wealth?’

“I’m finding a lot of founders are doing so sooner rather than later.”

There needs to be an alignment of values that are not just generally understood but also clearly established, he advises. In practical terms, this can take the form of a set of governance principles that goes beyond succession planning.

However, even a formal structure has its limitations, so there has to be a desire to pull together as a family.

Cohesion after the business is sold

Steve Legler is another family coach who knows his profession from personal experience. Legler took over his father’s companies and assets after he sold his business in 1991, and then married into another family business that also eventually sold off its assets.

The turning point, he says, is when the family transitions from a hands-on business to one of wealth, usually through selling off most or all of the enterprise. Before that point, the business often holds the family together because members work together or receive dividends. The company could also be a source of pride or status within the community.

But when the business dissolves, things change. “It’s not always easy to keep the family united around financial assets only,” Legler says.

“I always say, ‘Imagine you have a family business, and it’s a giant block of ice. You keep it in the freezer, and every once in awhile you take it out and a bit melts off, and everyone has a glass of water. There are some dividends coming off, or profits or salaries going out, but you still have that block of ice. That block of ice can last years or even generations.”

But when you decide to “take it out and put it on the stove in a big pot and turn on the heat, all of a sudden now you have a bunch of water.

“You may discover that the people in the family become thirstier than before because they see all that water.”

For the Saputo family, a pivotal moment was when the company went public in 1997, says Danielle. “Before then, there could easily have been, give or take, 80 family members working there.”

When the firm went public, “a lot of the family members branched off.”

How are decisions made? Finding alignment

If ordinary shareholders are disappointed with the direction a company is headed, they can just sell their shares. This is not the case for family shareholders.

Problems occur for family members when there is no participative decision-making mechanism, such as defining the role they play within the organization, says Giacomelli. That’s where alignment comes into it, he says.

“You will find that in families that have survived generations, the family members have a say not just in terms of operating the business but as a director, or as shareholders, and they build in decision making at the appropriate level. … Families that stay together are giving thought to these issues so that their interests are aligned.”

Of course, a lot of families need help working through dynamics. Communication is key, which means gathering on a regular basis, and not always for business. A third party non-family member can facilitate. Because there is often an emotional dynamic, such as sibling rivalry, an objective third party can mediate.

Legler learned from his father’s example the importance of communication, or lack of it.

“My dad called a family meeting in 1985 and did not call another one until 2006, [and then] only because he was diagnosed with cancer. So 21 years between family meetings is not recommended,” he says.

“I do this job a lot from the perspective of missed opportunities I saw in my family. It was all top-down, all him downloading stuff to his kids, no follow-up, no nothing, because it landed like a lead balloon. And he sensed we did not want to do this again.

“Instead, bring someone in who knows how to do this, and holds a family meeting that is some parts education, some parts fun, some parts shared experience together. The most important part is to schedule another follow-up family meeting, whether it’s a year from now, six months from now, or two years from now, but to have another one so you are instilling regular family meetings.

“Fast-forward to family meeting three, four and five, and they know what’s coming.”

More from Canadian Family Offices:

• Making money is hard. Hanging onto a family nest egg is harder
• WCD’s Brookman sisters convinced dad they could run the company
• As ‘godfather’ of family offices in Canada, Tom McCullough and his vision stand test of time
• Selling the family business brings brave new world, profound yet unsettling

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