A few weeks ago, the Globe and Mail wrote a story on my dad's company, Thunderhill Construction Limited. Working for my dad is actually how I got my start in real estate! Here's a copy of the article - the actual link is: http://www.reportonbusiness.com/servlet/story/RTGAM.20071113.wxsmallsuccession13/BNStory/specialSmallBusiness/home
Pass the torch without burning your business
Avoid classic mistakes like 'parental shadowing,' the 'clean-slate approach' and indecisiveness, experts say
GREG MCMILLAN
Special to The Globe and Mail
November 13, 2007 at 10:26 AM EST
Ron Solowka realized a long time ago that he wouldn't be working forever. As president of Thunderhill Construction Ltd., he knew the smart thing to do was to plan properly for the eventual passing of the torch to family members.
In textbook fashion, according to succession-planning experts, the Toronto-based general contractor is doing just that.
"I went through sort of the same thing with my dad. Only he thought he would be on the job forever and we really did not have a succession strategy," says Mr. Solowka, 57. "Rather than repeat the same mistake, we decided to go another way."
That meant adequately preparing his daughters Robin and Kyla to take the reins, using all the available techniques currently recommended for family business owners.
Twenty-six-year-old Robin started working part-time at Thunderhill while in her mid-teens and also took a family-business course at Ryerson University. In the past year, she has assumed a full-time position as the company's director of marketing and communications. Sister Kyla, 28, is the company's real estate and strategy consultant.
"I don't feel 100-per-cent confident that I can run the business at this point," Robin says. "I am currently going through the succession-planning stage. I think because of our involvement for the past 10 years, my father is realizing that we are bringing on board many new ideas and talents, especially in the management and operations end of the business," she says.
Robin says the transition has been building during the past couple of years, with the younger Solowkas being introduced to suppliers, sub-contractors and customers.
"We have recently been working with the lawyers and accountants to flesh out the issues of ownership, titles and roles, as well as future directions for the company," she adds.
Succession planning for family enterprises has changed dramatically over the years, says Mary Han, assistant professor of entrepreneurships and strategy at Ryerson University. In the past, such planning happened closer to the time when the founder was about to leave the business.
These days, increasing numbers of founder entrepreneurs "are empowering the next generation to be the strategic decision-makers and play a key role early on," she says.
Dr. Han says there are three areas family businesses should be wary of when planning for succession. "They should avoid parental shadowing, such as when the firm's strategies are locked in the past," she says. "They should also avoid a 'clean-slate' approach to the past where all traditions, legacies and its secret to success are discarded.
"Thirdly, they should avoid indecisiveness. Instead, members of a family business may need to pay more attention to being adaptive; by adapting the business to current competitive conditions, to new family dynamics and to a new ownership structure," Dr. Han says.
A 2006 survey from the Canadian Federation of Independent Business (CFIB) found that slightly more than one-third of independent business owners in Canada plan to leave their firms within the next five years. It also found that most owners of small businesses aren't adequately prepared for business succession: only 10 per cent have a formal, written plan; 38 per cent have an informal, unwritten plan - and 52 per cent don't have any plan at all.
The survey also found that accountants and legal advisers are the most common types of professionals used by small business owners to prepare a succession plan. Catherine Swift, chief executive officer of the CFIB, says it is also important to set up a family council to deal with all the emotional dynamics that will certainly arise.
A number of other factors should be in place to ensure a smooth succession, says Eileen Fischer, Tanenbaum Chair in Family Enterprise at York University's Schulich School of Business.
"If the founder was charismatic and high profile, it can be particularly hard for the successor to step into his or her shoes and gain the respect of all those who need to have it for the business to operate smoothly.
"Preparation and training of the successor is really important, but charisma is hard to compete with - and the only way of successfully dealing with this is often to have the parent back away completely, even if they still have energy and interest," she says.
Sometimes other stakeholders (such as key suppliers, distributors or investors) want to know the founding parent is still on the scene "because it's the parent they know and trust," Dr. Fischer notes. "This can put the successor in a difficult situation that requires real co-operation on the part of the parent if the transition is ultimately to work out."
Robin Solowka says her family is going about the process the right way. Although her father is still in charge, he is aiming to pass on more responsibility to her and Kyla in the next two years.
"I think because of our lengthy involvement in the business, plus our formal business education, it makes it easier for my father to have confidence in our abilities both on-site and in the office," Robin says.
When Mr. Solowka does retire, his daughters expect he will still provide guidance on issues or projects they might be unfamiliar with or unsure about. "But we have also made it clear that once he steps down from the role of president/CEO, his involvement in major decisions will be limited to just advice," Robin says.
Another challenge for any family enterprise is to keep the business and family dynamics separate. The Solowkas say this aspect is going well.
"It can be hard to separate business from family matters," Robin acknowledges. "We are fortunate to have open communication."
TIPS FOR THE HAND-OFF
Here are some hand-off tips from Eileen Fischer, Tanenbaum Chair in Family Enterprise at York University's Schulich School of Business:
Start discussions early, well before the succession is envisioned to happen.
Give at least as much attention to what the business needs as to what family members believe they need, but don't overlook either aspect.
Use external advisers or consultants to get an objective view on the potential successors and what they might require in terms of skills building, and to help facilitate transition.
Communicate, communicate, communicate. You can't afford to keep things "under the carpet" because both the business and the family can suffer if a decision is made without sufficient consultations.
Greg McMillan
Family business courses
Many Canadian universities offer courses and programs on family businesses. Here's a sampling:
Dalhousie University's School of Business, Halifax
John Molson School of Business, Concordia University, Montreal
Ted Rogers School of Management, Ryerson University, Toronto
Schulich School of Business, York University, Toronto
Ivey School of Business, University of Western Ontario, London, Ont.
School of Business, Wilfrid Laurier University, Waterloo, Ont.
Asper School of Business, University of Manitoba, Winnipeg
Haskayne School of Business, University of Calgary
University of Alberta School of Business, Edmonton
Sauder School of Business, University of British Columbia, Vancouver
