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Almost half of Canada’s family businesses expect to see an intergenerational transfer of management and/or ownership within the next five years.
But a new KPMG Enterprise report says that over 80 per cent have no formal plans in place to manage the family dynamics of the business, intergenerational wealth, and help prepare future generations to continue the family business legacy.
The report: Family Ties — Canadian Business in the Family Way was developed in co-operation with the Canadian Association of Family Enterprise.
“We know Canadian business families are in good shape and are optimistic about the future,” said Allen Taylor, chair of the CAFE. “However, the general knowledge and understanding of family businesses in Canada is sparse – this study aims to advance the understanding of family businesses, their current and future owners, and the attributes that equate to their success.”
Franco Lombardo, author of Great White Elephant: Why Rich Kids Hate Their Parents and financial adviser to high net worth families on wealth transition, was in Calgary this week and said more than 70 per cent of business successions fail from the first to the second generation.
“And you have the best legal, accounting and investment management minds working with these families … You’ve got to ask yourself: What’s not working?,” he said.
In his stable of clients, he works with six families that have an aggregate net worth of $8.4 billion — three of those families are in Alberta.
“Generally speaking, when it comes to advice on wealth transition and business succession planning, the current focus within the succession planning industry is nearly always upon the technical aspects of the process,” he writes in the book. “This approach is driven by the structural and tax-related issues, and typically never takes into account the emotions of the individuals involved.”
Lombardo said the book, which is out next week, was written with one goal in mind — increasing the odds of success in passing on wealth or the ownership of a business to the next generation.
“Contrary to popular, current industry practices, I firmly believe there is a much better way — and perhaps it’s the only way — to successfully bequeath wealth to your children,” he writes in his book. “The hallmarks of this better way require of those involved the ability to implement the process of wealth transition consciously, intentionally, and with a deep sense of love and in a state of generosity.
“Being mindful of the power of these emotional conditions also serves to create a more appropriate climate for wealth transition since they facilitate receptivity in those to whom the gift of wealth is to be bequeathed, and enable them to grasp the spirit of intention with a similar sense of love and in a similar state of generosity.”
Key findings of the report include: the biggest challenge facing future generations is gaining the right experience, skills and business knowledge while overcoming entitlement issues; the majority of the future generation respondents identified open dialogue, mentorship programs as well as formal training and development as key factors in deciding whether to join the family business; and 90 per cent of respondents believe that family business and industry associations play an important role in their success as well as securing the commitment of future generations.
“Transition of the business from one generation to the next is an area where future business needs and family dynamics do not always align,” said Beverly Johnson, partner, national chair of KPMG Enterprise, Centre for Family Business.
“The future generation will ultimately decide whether the family business and legacy continues; managing the expectations of potential successors should be on everyone’s agenda.”
Shawn Achor is the winner of over a dozen distinguished teaching awards at Harvard University, where he delivered lectures on positive psychology in the most popular class at Harvard.
He is the CEO of Good Think Inc., a Cambridge-based consulting firm which researches positive outliers — people who are well above average — to understand where human potential, success and happiness intersect. Based on his research and 12 years of experience at Harvard, he clearly and humorously describes to organizations how to increase happiness and meaning, raise success rates and profitability, and create positive transformations that ripple into more successful cultures. He is also the author of The Happiness Advantage.
Our most commonly held formula for success is broken. Conventional wisdom holds that if we work hard we will be more successful, and if we are more successful, then we’ll be happy. If we can just find that great job, win that next promotion, lose those five pounds, happiness will follow. But recent discoveries in the field of positive psychology have shown that this formula is actually backward: Happiness fuels success, not the other way around. When we are positive, our brains become more engaged, creative, motivated, energetic, resilient, and productive at work. This isn’t just an empty mantra. This discovery has been repeatedly borne out by rigorous research in psychology and neuroscience, management studies, and the bottom lines of organizations around the globe.
In The Happiness Advantage, Shawn Achor, who spent over a decade living, researching, and lecturing at Harvard University, draws on his own research—including one of the largest studies of happiness and potential at Harvard and others at companies like UBS and KPMG—to fix this broken formula. Using stories and case studies from his work with thousands of Fortune 500 executives in 42 countries, Achor explains how we can reprogram our brains to become more positive in order to gain a competitive edge at work.
Isolating seven practical, actionable principles that have been tried and tested everywhere from classrooms to boardrooms, stretching from Argentina to Zimbabwe, he shows us how we can capitalize on the Happiness Advantage to improve our performance and maximize our potential. Among the principles he outlines:
• The Tetris Effect: how to retrain our brains to spot patterns of possibility, so we can see—and seize—opportunities wherever we look.
• The Zorro Circle: how to channel our efforts on small, manageable goals, to gain the leverage to gradually conquer bigger and bigger ones.
• Social Investment: how to reap the dividends of investing in one of the greatest predictors of success and happiness—our social support network
A must-read for everyone trying to excel in a world of increasing workloads, stress, and negativity, The Happiness Advantage isn’t only about how to become happier at work. It’s about how to reap the benefits of a happier and more positive mind-set to achieve the extraordinary in our work and in our lives.