Survivor of three successions (one ‘a nightmare’), David Bentall advises from experience

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The passing down of leadership and ownership in family businesses can be as tangled and cutthroat as depicted in the HBO series Succession. But it doesn’t have to be.

We spoke with David C. Bentall, founder of Next Step Advisors, a Vancouver-based family enterprise advisory firm, about his own experience in not one but three successions at Dominion Construction, a business acquired in 1915 by his grandfather, Charles Bentall.

“These successions all happened before I was in my 40s. The first one was a complete nightmare,” says Bentall, who has written three books – of which two are focused on family business succession – while running his advisory firm and winning four Canadian National Water Ski Championships.

The next two successions went more smoothly, but each event was an “enormous education,” says Bentall.

Hindsight has further shaped his insights into lessons he now shares with other business families, and with Canadian Family Offices readers.

You’ve said that people are often unclear when they talk about succession. Can you elaborate on that?

There’s a lot of confusion because when people use the word “succession” they tend to be talking about succession in management or ownership, but they don’t clarify what they mean. They’re very distinctly different things.

An example is a family I work with in Saskatchewan. There are nine cousins who are all children of the three brothers who are in the business. The brothers were planning to leave the business to the six children who are also in the business. But why would you disinherit kids because they don’t work in the business? The brothers were surprised when I asked this because they just assumed that when you don’t work in the business you shouldn’t be an owner. In the end, the brothers decided to give all nine kids equal ownership in the business. That’s succession in ownership, and that’s separate from succession in management.

The other thing is when professionals talk about succession what they’re typically thinking about is a technical solution. For example, if you’re an accountant succession means minimizing taxes or doing an estate freeze. If you’re a lawyer, succession means preparing a will. If you’re in human resources, it’s about training people and creating a personal development plan. Succession means different things to different people, so you need someone with a more holistic and relational view.

How was succession handled in your family business?

In our family we paid good money for tax and legal advice. We created an estate freeze and all shares were given to us 11 cousins while voting shares remained with Generation Two. There was no thickheadedness about the whole exercise. There was no conversation with any of us 11 cousins about wanting to be business partners. The tax accountant basically asked, “Would you like to minimize taxes when you die? Would you like to leave money to all the kids?” There was nothing wrongheaded about it – whether any of the kids wanted to be business partners just wasn’t considered.

I’ve written about the importance of talking to kids about what they want. The bulk of my mom and dad’s estate was given to us in shares. I will always be extremely grateful, but most families don’t take the time to ask, “Would you rather have cash or would you like to have shares and be a partner in the business?”

You’ve been personally involved in succession events three times in your family’s business, and again in your current business. Can you highlight the challenges in each of these events, and the lessons learned?

The first one, working with my Dad and uncle, one central problem was they didn’t have a shared vision for the future. My Dad and uncle worked side by side for 40 years. My uncle wanted the company to go public and my Dad wanted to keep it in the family. My uncle wanted to just be real estate development and my Dad also wanted to do construction as we had done for 75 years. When my uncle took Bentall Real Estate public, my Dad and I asked to leave the family business. My dad died with a broken heart – it was horrific.

When my sister and I bought the construction business, we realized from our Dad and uncle’s experience that we needed to have alignment. So we created something I call a conceptual plan, which clarified what we wanted. This gave our management team a framework for the future.

Third succession: My sister and I were co-owners for 10 years. We had paid back all the inter-company debt we had. Then my sister’s husband said “I’m 55. When I’m 65 I’d like to leave my children a future that does not include co-ownership with their cousins (my children). Why don’t you buy your sister out?” I went home and said to my wife, “Why would I borrow money to buy a business I don’t even want to be in?” So I thought, if I had a partner with added expertise, maybe I could own 50 per cent of the company, have a 25-per-cent partner and have the rest of the management team be partner. I made a proposal to my brother-in-law and he said, “I think the business is worth more than that.”

We had an auction clause put in our business agreement 10 years earlier that enabled us to resolve how much my brother-in-law and sister would be paid. Their goal was to disentangle. They were a decade or more older than me and their kids a decade or more older than mine. They wanted to avoid having cousins who are very different in age being partners. With an auction clause, you name a price at which you will be willing to buy and the other person would either accept or have the option to bid back five per cent more. Then you would have the option to accept that bid or bid back five per cent more. That auction clause enabled us to bid back and forth until we had a price we were both happy with.

I believe you said previously that there are three things business families need to do for a successful succession. What are those three things?

One: Have regular family meetings. These are helpful to families because they create a forum for discussions.

Two: Have a board of directors with independent members. The elder generation will always find it difficult to transition leadership and authority to the next generation. One of the ways they can do that is have trusted advisors around the table with them helping them trust the next generation. Also, an independent board can help families make more rational and objective decisions.

Three: Have some form of formalized strategic planning process. This will create a structure that will require or force people to talk about where the business is going, what capital will need to be invested and what is the marketing plan. These three things will help family-owned businesses move from seat-of-the-pants to more inclusive planning.

How do you help business families handle tough situations and tricky relationship dynamics?

The first way we help is just by being in the room. What I mean by that is often people will tend to behave respectfully toward their family members when there’s an independent third party present. It’s like when you’ve got guests over for dinner. Your table manners tend to be better.

With every family we work with, we invite them to create their own code of conduct, which explicitly lists how they want to behave. We ask them at the first meeting what would make our meetings together safe and productive. Often people will say we want everyone to be able to share openly and honestly and we’ll ask them how we can ensure that it stays appropriate. So then they might create a code of conduct that says “no interrupting, no yelling, listen to each other, be respectful, be solution-oriented.” Then we help them to live their code of conduct.

The other thing we do is provide, in virtually every family meeting, a learning opportunity. For example, we help them learn the five different ways of handling conflict. Then the last thing we do is we work with each of the individuals through one-on-one coaching or providing them with reading material that can help them.

You also help families develop better decision-making processes. Could you share some of the key aspects of these processes?

The fundamental idea around helping families develop good decision-making processes is to have the right people in the room for the right topics. For example, most families fall into habits of having no boundaries regarding what’s talked about and where it’s talked about. Many families will have business conversations at the kitchen table and they will also have personal family conversations at the boardroom table.

That should, generally speaking, not be the case. If you have a family meeting at the boardroom table, you are making it a business meeting just by virtue of where it is. And the patriarch or matriarch will typically then sit at the head of the table. Therefore, they are implicitly in a position of power – which they already are in the family – but now we’re adding on their corporate position.

My favorite places to meet are a retreat setting or a hotel meeting room or maybe a tennis or yacht club. They’re formal enough that we can have a boardroom table but it’s not Dad or Mom’s boardroom table.

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In addition to this, we help families make better decisions by having the right people in the room. If a family is making decisions regarding dividends, then we actually have the wrong people in the room because family shouldn’t be making decisions about dividends. The board of directors should. We help families identify who should be making decisions regarding things like salaries, capital investments and new projects. It’s about clarifying who should be responsible, it’s not about saying people can’t have a voice in some decisions.

We’ve talked about how your own family’s enterprise started to get torn apart as it approached a century in business. How easy was it for you to assess from a very, very objective lens, what went wrong? And how do other family members view the breakdown of your family business?

It was 30 years ago that things blew up between my Dad and my uncle in our family business. I’ve been able to see more clearly over the years the part that I played and how I could have been more constructive in that. Distance and education have helped me to get a better perspective. As I’ve worked with other families, I’ve learned more about family dynamics. Seeing other families behave in ways that I thought were unhelpful enabled me to see that I had actually been behaving that way myself years ago.

I haven’t talked extensively with family members about my perspective and what I’ve written, but I did review my book with my cousin before I published it because I wanted him to read what I’d written about his father. And I shared it with a close friend, who is a lawyer. Then my assistant, Caroline, said to me: “David, I think you need to take this section out of the book where you talk about this ultimatum that your uncle gave your Dad.” My middle daughter walked in and I told her I was really frustrated because I think that the entire story of our families tipped on that moment [when] my uncle gave that ultimatum. My daughter, who at the time was in her early 20s, said “Dad, no that was not the problem – that was just on the surface.” And I sat there thinking, she’s absolutely right. I realized that what I had seen back then as an ultimatum could have been an olive branch. My uncle actually did say, “You do this or else,” but he also said, “If you do this, we can work together.” But I just saw the “or else.” So it takes time, and it takes the help of other people’s perspective.

What’s your approach to coaching the next generation of family business leaders?

Sometimes it’s about helping them develop different patterns for how they relate to their parents or their siblings. One particular individual had this relationship with his father that was challenging, so the focus of the coaching was mostly on how he could be different. It’s not his job or our job to change his Dad. But we can help him to be different in his relationship with his Dad. It’s important to have empathy for the older generation and what they are dealing with. It’s also important to have more humility, more curiosity about what’s happening with the other person and to create a virtuous circle where individuals – particularly successors – can learn in their relationships with their siblings, with their parents, with other executives.

So in our coaching we’re trying to help members of the next generation cultivate these truths. We also talk about forgiveness, gratitude, patience, critical thinking and contentment. How we get past that sense of entitlement is by cultivating a sense of gratitude for what we have.

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