Nitty-gritty of succession: Holding a mirror to families, looking for leaders

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Succession planning is one thing – but successful, sustainable succession planning is another.

It’s a process that can take years, says Gerry Pulvermacher, a licenced clinical and organizational psychologist who specializes in the transition of family businesses.

“There’s the planning piece, then there’s the implementation piece and then there’s actually the sustaining piece,” says Pulvermacher, founder of Gerald Pulvermacher & Associates.

There are no blueprints for a plan. A plan and family charter are living documents, he says, and every family is unique.

He worked with one family whose patriarch started the family business 70 years previous and had passed on. The heirs wanted to update the decades-old family charter to reflect a family now composed of several generations and close to 30 people.

In that case, re-crafting the family charter took the better part of two years and two to three more to implement and fine-tune, he says.

“They wanted to have a document that would actually stand the test of time,” he says. “That document is a reflection of the vision of the business, its purpose and its values. And those become the touchstones for decisions that get made, so it can take a long time” to perfect.

Pulvermacher works with a team of 28 people around the world, including in Ottawa, Toronto, Winnipeg and Vancouver as well as Portugal, the United Kingdom, Paris, Singapore and Mexico.

Answering the tough questions

Who will run the business is just one of the questions enterprise families need to work through, he says.

Among others:

• Should spouses of family members be involved with the business and how? Directly, as shareholders, or on committees?
• What happens if a family member is not performing well?
• What differentiates the family business from the family’s wealth management, and who is involved in which?
• Is there a place for professional, outside managers?

“My job is to help them realize the issues they have to address, and what are the different options that might be available for them to consider, because they don’t really know what options there are,” Pulvermacher says. “When you’ve been doing this work for a long time … you get to see some best practices and where some fault lines are.”

Danielle Saputo prefers what she calls “continuity planning” with clients.

Coming from the third generation of Montreal’s Saputo family, whose business has grown into one of the top 10 dairy producers in the world, Saputo has channelled her personal experience into her work as a certified legacy coach and family advisor.

“It’s a continuous process of really trying to bring forward that education … really learning how to run the race together.” That takes time, she says.

Families have the answers, but …

At its core, the process is about preparing incoming generations with the right education and tools to succeed, she says. “That does not happen in one sitting.”

During the first series of meetings – as a family and one-on-one with individual members – she explores the family’s core values. She wants every family member to have a clear understanding of the goal, she says.

Saputo says it is not her job as an advisor to provide solutions but to act as a sounding board and spur important conversations.

“Really, it’s the family themselves who know the answers of what’s best for them,” she says. “I become that external person who’s not caught in all the family dynamics or past history and saying ‘This is what I’m hearing.’ And you start pulling out all those wonderful pieces the family is unfolding themselves.”

That may happen at formal meetings or at fun family holiday retreats. The idea is to see how the family makes decisions together and help them to see it, too, Saputo says.

“Over time, they come to see who has the strengths, who has what capabilities, who shines when it comes to bringing the family together and who shines because they’ve set up a strategy for how to make such-and-such business decision.”

Behaviour profiling

Choosing the right person and putting the proper mentoring in place is the best way to ensure a successful succession, says Mark Barnicutt, president and CEO of HighView Financial Group, an Oakville, Ont., investment counselling firm whose services include helping high-net-worth clients build a virtual family office.

“To be done properly it takes several years, because it’s not like you wake up this morning and say, ‘Congratulations, here’s the keys to the palace,’” he says.

He meets with the matriarch and patriarch to clearly understand what they want accomplished, he says. Then it’s a matter of exploring the skills and behavioural profiles that are necessary.

“I like to keep people agnostic, especially in families,” says Barnicutt, himself a successful entrepreneur. “They probably have somebody in mind and my question is always the same: Have you actually identified not just the skills of the job, but what the behavioral profiling of it is?”

He regularly works with behavioural psychologists to do the work of finding that right fit, working with the family leaders to assess potential candidates, from within the family or from without. That may take months.

“At the end of it you’re going to know whether or not you’ve got a match,” he says.

With successor chosen, then work begins

It can be a difficult and very personal decision whether to choose a family member without the optimal skills and then fill the gaps with coaching and mentoring, or step outside the business or family to find someone, he says.

An objective, transparent process will make that decision – and any potential fallout – more manageable, he says.

In other cases, the right person may be within the family but reluctant. In that case, coaching and counseling may bring them around.

“But if somebody truly doesn’t want to do it, even though they might have the ability, I think it’s a bad idea to force that on somebody,” he says.

With the successor chosen, the process of coaching and mentoring alone may take a few years, he adds. While successors may be well-versed in the family business, managing the family’s wealth – the investments, insurance, banking, wills, powers of attorney and whole range of decisions that come with managing wealth – is another matter, he says.

This is where many successful enterprise families feel most vulnerable, Barnicutt says.

“Financial prosperity depends on you figuring this out. It can be pretty daunting,” he says.

More from Canadian Family Offices:

• How Canada’s new luxury tax (on cars, boats and planes) works
• Five smart ways to transfer wealth to your children, grandchildren
• Five mistakes to avoid when appointing an executor for your estate

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