What’s the plan? Succession Planning

Kelly Maxwell - Jan 15, 2024
Blake Griffith provided his expertise and insights to this informative Succession Planning article written by Jamie Zachary.
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What’s the plan? Succession Planning

Experts urge communication when looking to avoid conflict during succession planning

Blake Griffith provided his expertise and insights to this informative Succession Planning article written by Jamie Zachary.

Entitlement. Power struggles. Unresolved history. Contrasting visions. Trudy Pelletier has seen it all while mediating conflicts that often occur during business ownership transitions.

The Calgary-based president of Trudy Pelletier Consulting has spent nearly two decades facilitating difficult conversations with families, teams and leaders as they talk through issues that often go back decades.

“Many of the businesses that come to me are about to make some kind of significant decision – whether that’s naming a successor or putting together a board of advisors – and they worry that whatever they do is going to cause more friction,” says Pelletier, whose list of certifications centre around exit planning, family enterprise and executive coaching.

David Blom has had a front row seat to this conflict play out. In fact, the chief operating officer and senior advisor at Blackwood Family Enterprise Services has gone so far as having to break up a few rounds of family fisticuffs over the years.

“In some cases, the conflict traces back so long ago that they don’t even remember why they were fighting in the first place. In other cases, it’s so deep rooted, I’ve broken up fistfights,” says Blom, whose Calgary-based organization officially launched this past January, and currently works with about 50 families across Canada ranging from mom-and-pop shops with $3 million in annual sales to family-run billion-dollar organizations.

While the details differ, the common thread typically boils down to poor communication – people on both sides not conveying their wants and expectations.

“People draw their own conclusions when there’s no conversation, and it’s never a good conclusion,” says Pelletier.

“What I distinguish for people is there’s brain-driven predictions, conclusions and assumptions that we live as though they’re true, which often is a barrier to having the conversation. Is it a conflict? Or is it just a missing conversation?”

Clayton Achen, co-founder of Calgary-based accounting and tax firm Achen Henderson, says, “almost always,” there’s different ideas about how the business should be run.

“And there’s pent up sort of resentments or jealousies or fears about what’s going to happen,” he says. “That should be communicated right up front, but it never is. Those conversations rarely happen.”

On the flip side, Achen often sees senior owners who have a vision of how the company will be run in their absence, but haven’t communicated that to the next generation, whether that’s their children, employees or third-party investors.

“They want to leave a legacy, but it’s almost always to run the company like they ran it,” he says. “Then, when the 
conversations actually start happening, they realize the new owners have a very different idea of how the company should be run, and that’s when the conflict starts.”

Similarly, Blake Griffith, a Calgary-based financial planner with Sun Life and Griffith & Associates Financial, says he’s seen conflict stem from businesses owners not willing to let go of the reins. 

"Because they are not ready to let go, it does create some hesitation around putting pen to paper and laying out an actual written succession plan,” he says. This leads to the all-too common scenario of owners then trying to play catch up at a time when they should be transitioning out of the business.

“Too often, we’re seeing business owners beginning to look for advice when they’re ready to retire. A successful succession plan oftentimes takes years to implement, not months,” says Griffith, “It takes a multidisciplinary team of financial planners, accountants and lawyers all coming around the table, working together to not only identify the risks, but also the planning opportunities – the tax nuances outlining, all the things that could arise.”

And if you think this only applies to family succession planning, you’re wrong.

“You’d think that a succession plan between non-family members is going to be wildly different from one between family members, but … (it) really isn’t always as different as people might imagine. Whether it’s a child purchaser who’s been working at the business for years or a key employee, the buyout structure in those scenarios is very much the same,” he says, adding there’s the caveat family succession does come with some added layers as it relates to the Income Tax Act.

For the family-run businesses that Blom works with, he starts by seeking clarity around three main areas: business, family and ownership.

“We interview everybody separately and then we try to find some common ground on each area,” he says. “For example, we might look at what does succession need to look like? What are each person’s expectations? How can we help the business make the best choices on how to get that generation ready to come into the business?

“By the end of it, the hope is you either have a family that either is in agreement on a lot of items, or they agree to disagree and they’re able to work around the conflicts that exist from there."

Pelletier’s approach is similarly to create an environment where everyone can be “heard, seen and understood” such that there’s now a new space between people.

“From my very first meeting, I’m out to understand how they are listening to each other. Sometimes it’s very visible. Sometimes it’s not,” she says.

“The other thing that I would say is, there’s lots of processes to resolve conflict, but those processes never work unless people are heard, seen and understood. So, it’s slowing people down. Asking questions for clarification. What is respect to you? Maybe it’s something different for the next person?”

Pelletier also encourages her clients to come into these conversations with open minds.

“If you go into those difficult conversations being anxious, impatient, nervous or frustrated, then that can show up in your communication,” she says. “Could you go into this conversation instead being curious, direct, authentic, vulnerable, patient or generous? Could doing and saying different things produce a different result?”

Achen adds business owners might have to accept they will never be able to eliminate conflict. It’s about managing conflict.

“It will always be there. The point is to have a plan – get clear on the roles and responsibilities,” he says. “Have milestones. Have something you’re working toward.”

Blom says that also means accepting that every succession plan will look different, whether it’s succeeding it down to the next generation, an employee group, third party or even a cash asset.

“Succession of the business is different in everybody’s mind,” he says.

“The best advice I can give you is that there’s no silver bullets to this. It’s a process and it takes time. And once you develop a picture of where you want to go, it’s not a static picture. It’s a motion picture. So, it’s important to have a good cadence of meetings with the family, with the owners, to make sure that they understand what that legacy looks like.

“For the majority of businesses I’ve dealt with, their financial assets have performed way better after they went through this process than they did before. The reason is because they have clarity on what they want to accomplish.”