megram - Index

megram - 55JunOttawa - Index

Your Finance
By John Johnson, LL.B
Succession
Planning
Passing on the family business requires pre-planning
Succession planning for a family-owned business
involves the passing of the ownership and control of
a family enterprise from one generation to the next.
This transition involves much more than the impersonal
transfer of control of business assets. There is a deeply
rooted human tradition of passing heritage values, property
and the family name from one generation to the next, a
tradition that leads the owner parents and their children
to search for means whereby the business can stay in the
family.The objective is to have the business remain in the
family and to have the family remain in the business. If
that is accomplished, then by definition it is a successful
family business.
It is important to recognize that the transition involves
changes in the business and in the family.These two important
elements, the business and the family, are inextricably
woven together. It is generally recognized that the most
important component of most businesses is its management.If
succession is to occur it is vital to identify the individual
who will succeed the founder and be responsible
for the management and direction of the business.Without
the key ingredient of good management the business is
unlikely to be successful.
It is important that all parties who are involved in the
family business recognize that the family business is different
in a variety of critical ways and that it also functions
quite differently from non-family businesses. Family busi-
June 2008 • 24 • Fifty-Five Plus Magazine
nesses have to be able to adopt constructive strategies to
deal with the peculiar dynamics that surround the owner
and his or her family and the company itself.
The family is a hierarchical organized system, the members
of which are bound together by both negative and positive
emotional ties. Families are often consciously or subconsciously
influenced by ingrained relationships, roles and
patterns of behaviour between family members and generations.
The family system tends to be conservative, inwardlooking
and centered on preserving the equilibrium of the
family with a high degree of emphasis on loyalty.
By contrast, the business system is built around contractual
relationships with emphasis on performance,
results and productivity. In order to ensure survival and
prosperity, businesses operate to make the most of these
factors. In family businesses these two incompatible elements
not only overlap but may also conflict.The inherently
different purposes and priorities of business versus family
will always result in tension and friction both within
the family unit as well as the business unit.
While the conflict arising from the overlap of these
two systems cannot be avoided, strategies can be devised
to keep it under control and the owner of the business can
take advantage of the positive attributes of the family system,such
as loyalty and commitment and sharing in a common
enterprise, to convert those benefits into commercial
strengths and success for the business.