Creating a sustainable family-owned business

Did you know that 70% of family-owned businesses don’t make it to a second generation? What about the fact that 90% of these businesses never make it to third generation? Those are pretty scary statistics. Granted, many of these businesses were not created to provide a legacy from generation to generation, but what about those that were? What happened to them? Many times there is a difference of opinion between parent and child on how to run the business, other times there is a lack of interest from the children in getting involved and other times the business is just not sustainable. If you are the owner of a family-owned business and you want to know how you can avoid being in the statistics above, here are three things you can do to buck the trend:

  • Have the succession planning discussion with your kids early and often
  • Align your personal objectives with the objectives of the company
  • Determine roles and responsibilities and develop a transition plan

By taking these three steps, you will be ready to hand off the business successfully to the next generation, or at least know that they are not interested so another strategy can be developed. Have the succession planning discussion with your kids early and often Too many small business owners just assume that their children have the desire (and the capability) to take over the business and run it successfully. This is not always the case. Get your family involved in the business early, summer jobs, internships, projects, etc. to give them insight into the business. Let them decide if it is right for them. If they show interest, have discussions about how they would manage the business, changes they would suggest how the transition might work. Help them visualize what their life would be like if they were running the business and ensure that you are comfortable handing over the reins. The biggest mistake business owners make is bringing in younger family members to run the business, but not getting out of the way to let them do it. If it turns out that your children are not interested in taking over the business, you know early and can develop an alternate exit strategy. Align your personal objectives with those of the company If your children show interest in taking over the company, and you are comfortable with that, then the family’s personal objectives need to be aligned with those of the company. Is the job for the next generation to grow the company? To reduce the cost structure? To provide enough income for the parents? Maintain a retirement nest egg? All of the above? This is an important step in determining how the business will be run. The next generation will come in with new ideas, but those ideas need to be executed in order to help meet the company objectives. Those objectives need to be agreed upon by all family members involved in the succession planning of the company because those objectives need to be consistent. Without consistent objectives, the business will have no direction and each family member will have a different perspective on what needs to be achieved. Determine roles and responsibilities and develop a transition plan Once you have decided that your children will be taking over the company, you need to develop a transition plan identifying roles, responsibilities and timelines. When will the transfer of power take place? What needs to be completed before that can happen? How long should the transition take? These are all important factors to consider. You need to know if your child should work in the business for a year to get to know customers, employees and suppliers before just taking over as President. You need to avoid creating two camps within the company between those supporting the old guard and those supporting the new guard. There needs to be a clear, public, transfer of power so that there is no misconception as to who is in charge. The change needs to be supported at all levels of the organization so as not to impact company performance. Handing over control of your business will be one of the more difficult things you will ever do. You have likely spent most of your life growing this business and putting your blood, sweat and tears into it and now someone else will be running it. However, you should be proud that it will be staying in the family and by following the advice above, you know that you will be leaving the business in good hands and going in a direction that is consistent with your vision.

Poland and succession planning

What can the tragedy in Poland tell us about succession planning? Simple. Every organization should have a succession plan. It is a terrible and tragic event that happened when the President, his wife, his army commander, his naval commander and other senior staff and advisors all died in a plane crash. Governments usually have a plan in place for succession, but it was certainly never anticipated to be on this large a scale. Nevertheless, each department has a succession plan for their leadership in order to keep the country running smoothly. Does your organization have a succession plan? What would happen if your whole leadership team walked out tomorrow? Do you know who would take their place? We can never anticipate when tragic events such as the one in Poland will happen, but we can be ready for them when they do. Identify the next-in-command for all of the critical roles in your organization. The last thing people need when they are dealing with the shock of such a tragedy is the perception of a leadership vacuum. This leads to chaos and panic. Prepare for the worst. It is one of those unfortunate lessons we learn when disaster strikes.

What's with all of the political scandals?

There have been quite a few scandals lately in local and federal politics in Canada and it makes me wonder…..how do these people think they can get away with these things? Does being in the public eye create a perception of invincibility? I would have thought the opposite, that the more public your life became, the more careful and conscious you would be of your actions.

A couple of examples:

Adam Giambrone, chair of Toronto's public transit system and formerly a strong candidate for mayor of Toronto was found to have numerous mistresses while living with his girlfriend. He was proported to have used his civic office to host "meetings" with his mistresses. Do I really care that he had mistresses? Not really, but it does show a characteristic and lack of judgement that reduces my faith in his ability to run my city or my transit system. This is not a question about morals or ethics, it is a question of judgement. He knew his actions were wrong or he would not have apologized, yet he continued with them.

Rahim Jaffer, former federal MP and Chair of the Conservative caucus is being accused of using his wife's office (current MP Helena Guergis) to win federal government contracts. Not to mention that little incident where he was pulled over for drunk driving and was found to have used cocaine. Again, not an issue of morals or ethics. I don't care that he drove drunk, other than the safety risks that come with it. I care that he (and possibly his wife) showed poor judgement in making decisions.

One could compare this to the Tiger Woods situation and ask how can people who are so smart be so dumb? I believe the examples above are worse than the Tiger affair because these people are being paid by the people they represent. They were voted in by their constituents, and it is likely good judgement was one of the reasons people voted for them.

These politicians have let everyone down. They are in the public eye, are getting paid with taxpayer's money and using public resources, so they should be held to a higher standard. Not to mention the fact that these are the people we chose to run our cities and our country. I am not sure what else to say other than I hope these are anomalies and not the norm.

What will lowering generic drug prices do to Ontario’s healthcare system?

There has been a lot of talk lately about the fact that the Ontario government is going to force the lowering of the price of generic drugs. The government says this will lead to about $500m in savings. That is a pretty compelling number. But how does will it impact the pharmacies, the pharmaceutical manufacturers and ultimately the consumer, you and me?

Pharmacies are saying that lowering the drug price and eliminating professional allowances (the amount paid to a pharmacy by a drug manufacturer to stock their product) will have a huge impact on their profits. If these changes happen, they say, they will be forced to cut staff, cut services like home delivery and patient counseling, reduce the number of locations and cut hours. They also state that they will need to increase dispensing fees.

Some pharmaceutical companies are claiming that if the sole focus on the purchase of generic drugs is price (as opposed to quality, supply, results, etc.) then they will no longer be able to compete with the low-cost drug manufacturers.

Then we have the consumer, who through all this, should be paying less for the drugs that they need, but at what cost? Is it worth a lower price if the local pharmacy closes down and I need to walk another 10 minutes? What about if the pharmacy closes at 6pm and my kid gets sick or my grandmother needs medication in the middle of the night?

The key is to figure out a way to minimize the impact on all parties involved, minimize the risk and maximize the benefits. The government needs to find a way to significantly reduce any risk of this decision impacting services currently provided to the consumers. Cost savings should not come at the expense of inferior services. They also need to work with the pharmacies and pharmaceutical companies to minimize the impact on them.

We need to find ways to ensure that the pharmacies do not need to cut services like home delivery, patient counseling and 24-hour service. Do we need a 24-hour pharmacy on every corner? No. Do we need access to a 24-hour service in case someone gets sick in the middle of the night? Yes. So find the middle ground in what we have versus what we need.  We also need to anticipate the impact on hospitals. If 24-hour pharmacies close down, are more people going to visit hospitals in the middle of the night?

Pharmacies will need to figure out how to offer services at a lower cost. This could come from government subsidy or support.

Pharmaceutical manufacturers will have to find new ways of adding value to the pharmacies and the customer. Why can’t they perform the home delivery or provide resources for patient counseling?

The consumer may need to get used to a system not as convenient as the current one.

I am all for change, I just hope that we are not trading off quality of care and level of service for the almighty dollar in something as important as healthcare.

Is Twitter the new normal?

Is Twitter the new normal? Boy, I sure hope not. As someone who runs their own business, I wanted to ensure that I am familiar with the new forms of social media – Twitter, LinkedIn, Facebook, etc. So I tried them out to see if they could help attract new clients or correspond with existing ones. So far, I have not seen the return in investment. Luckily, my only investment has been time.

Twitter seems to me to be the most puzzling of all because so many people use it ineffectively. Facebook is great for staying in touch with friends that you have not spoken to in 20 years and don't actually want to talk to, and LinkedIn is great if you are actively looking for or recruiting for a job position. So what is Twitter? To me, it is most effective as a news feed. I follow a couple of prominent newspapers and a few high profile people so that I can stay on top of important pieces of news information. I got tired of reading people's personal Tweets because I don't care what they are doing at any given moment throughout the day.

If the new normal is constant updates on people's whereabouts, broadcasted to the world, then I am not interested. I think Twitter makes people feel more important than they are. How can someone be following, actually following, 3,000 people? I am following less than 20 people and it is hard to keep up. It creates a false sense of value because a false sense of importance is created. "If that many people are following me, then I must be important and have important things to say."

I think Twitter has become a great news feeder service. Getting on the ground insight into world events as they happen and getting news stories faster than the radio has its benefits. The short format of a Tweet (140 characters) also ensures that we do not have to invest a lot of time to find out valuable information. It has become the perfect service to feed our ongoing need to want information immediately and fuels our ridiculously low attention spans. The more information we can gather without actually having to do anything, the more we will use these types of services.

Who knows what will happen in the future, but services like Twitter certainly have some value. I just hope that value is not in continuing to advocate a society where all conversations become one to none, because there is still no way to replace a good conversation.