Family feuds

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|Canadian HR Reporter|Last Updated: 05/14/2001

When you look at the numbers, the need for succession planning at family-run businesses assumes a great urgency.

About 70 per cent don’t survive the second generation and 90 per cent don’t make it past the third generation. The startling failure rate, it is widely held, is due in large part to a lack of succession planning.

“I think people are still reluctant to deal with it,” says Debby Stern, a partner in KPMG’s succession planning practice. “It forces them to make some difficult decisions.”

Aside from forcing them to think about their own retirement or death, leaders in family-run businesses also have to deal with choosing one child over the other, or else no offspring are capable and somebody from outside has to be brought in. Maybe the best idea is to sell the business altogether.

Rather than make those decisions, the hesitant parent often leaves it up to the kids to decide. Too often, the heirs start fighting and derail the business because they are so caught up in their sibling rivalries, other employees get frustrated and leave.

“We always tell those families to start (succession planning) early. As soon as you know you have kids in the business,” says Stern. It can take two or three years just to get everyone to agree on a plan. Everyone involved usually has completely different ideas about what should happen to the business and who should lead it. Once all of the issues are on the table and everyone is on the same page as far as who should take over, it can take another five years to prepare the selected replacement for succession.

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