Family business – a different approach

Posted: September 29, 2013 in Family Businesses

I’ve spent the last several posts commenting on flaws in the family business modus operendii. It isn’t all bad of course. There are tens of thousands of family businesses in this country that have successfully transitioned from generation to generation.

There is one novel approach used by Canada’s  Jim Pattison. He is one of the wealthiest men on Canada and, at last count, he owned close to 70 companies.  The Jim Pattison Group is ubiqitious. However, Pattison has no family members in his empire. He strongly believes that his kids need to make a life (and fortune) for themselves – on their own. Pattison started out in the car business. He looked at the output (of his sales staff). The lowest performers on the sales chart were always terminated.  This is a very tough business approach but, it worked for Pattison.

While that might be at the  extreme end of the spectrum, I have read articles in various business magazines in Canada and the US where, the best run family businesses were those that required the next generation to gain business/management experience at non-family businesses before they joined “the firm.”  It makes sense. A large business could never survive without a strategic plan, a complete understanding of their market, budgets, responsibilities and accountabilities.  This means “structure.”

Once the family member has 5-10 years business experience then they may be ready to think about joining the family business. They bring experience and insight if they decide to join the business. In hindsight it would have been a benefit to both me and the family business if I had opted for this approach. However, hindsight is 20-20.

The newcomer to the family business might ask some tough questions of his/her parent. Do we have a strategic plan? What market are we in and are there any market trends that could impact our business? Do we have an organization structure that will allow us to focus on strategic direction yet make sure the day-to-day tasks get done? Oh yes, one other thing: does will business make a profit after adding my salary?

Tough questions but fair. These would never be asked if the newbie hadn’t gained experience working somewhere else. This is called due diligence.

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