The backdrop: the entrepreneurial spirit of Canada’s family businesses drives the national economy. These owner/managers have built strong businesses focused on continuous improvement, innovation and a commitment to their people and communities. Many have grown their businesses from the grain of an idea to a point where more sophisticated processes, technology and skills are needed to take the business to the next level. In order to reach their full potential and compete on a global scale, they may need to open their minds to the idea of bringing in non-family professional management.
Consider the findings that emerged from Creating a lasting legacy, the Canadian supplement to the 2012/13 Global Family Business Survey: 69% of respondents from coast to coast cited finding top talent as their biggest internal challenge. At the same time, 49% are not planning to pass the management of the business on to the next generation in the next five years, either because they don’t believe the next generation wants the job, or because they don’t have the skills and capabilities to manage and grow the business. Of those family businesses that do anticipate handing over management to the next generation, 44% share the same concerns. Not surprisingly then, some of the respondents point to corporate structure and a lack of expertise as negative differentiators in family businesses. “Once a business grows to a certain size, and we often see it when companies hit around $100 million in revenue, the game changes. To be able to scale the business, there is a foundation that needs to be in place. The fact is, family business leaders usually know in their gut exactly when it’s time to move to a professionally-managed team,” says Tahir Ayub, Canadian Private Company Services Leader, PwC. “Most family business owners know the limit of their skill set and that of the next generation and realize they will need to bring in professional managers to achieve the next level of growth. The tough part is taking action and going about it in the right way.”
Over the next five years, Canada’s family businesses are gearing up to defend their market share in the face of aggressive global competition. “Whether a succession plan is in place or not, whether there will be a sale or not, professional managers can change how the business thinks for the better and can help in this fight against larger global competitors,” says Ayub. “Finding and bringing in the right professionals to run the company provides family businesses with deeper, more broadly skilled individuals—non-family members—who have worked in other companies and grown those businesses. Professional management brings new thinking into the business, which in turn leads to innovation and growth,” he continues.
Still, handing over the reins to a professional management team is a tough sell. Family business owners are used to making all the decisions and it’s hard to let go. Here are some proven strategies to smooth the transition to a professionally-managed team and help ensure the long-term viability of the family business in the process:
Finding the right people, then letting go and allowing the new team to make decisions is the hardest part of the transition to a professionally managed team—but it is also the most critical. “Family business owners are not used to hiring CEOs and COOs and then stepping back,” says Ayub. “It typically takes one to two years to get this piece right. But when you do, the new team will help you execute the vision and strategy in a new way. They will help the business grow and that’s the goal.”
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