Toronto Canada

Tel: 1 (416) 360-0177

apervin@pervinfamilybusiness.com
http://pervinfamilybusiness.com/

Pervin Family Business Advisors

Profile of Aron Pervin

Resolving Interpersonal Conflict

THE FINANCIAL POST – Joint Venture Supplement – April 2, 1994 – S11

A couple of years ago five electrician brothers who worked together in a family firm had to deal with a job division problem that was harming the company. One was the group's best salesmen, but when he spent his time selling their services rather than working on job sites, the other siblings and their spouses felt he wasn't properly pulling his weight and consistently reminded him of that.

If, guiltily, he then pitched in and did the same job as the others, the amount of new business they received declined. Eventually the five had to hold a series of intensive family meetings to work out new job responsibilities.

The fact is that family priorities and business priorities are always in conflict, explains Aron Pervin, a Toronto-based management consultant who has advised hundreds of families over the past 12 years. "The family wants everything harmonious, while the business has to change or die."

Especially when the family business becomes multigenerational, with children, spouses and grandchildren involved, such conflicts can escalate. Rivalries and resentments can fester and end up destroying the company because of "looped communication patterns where everyone is second guessing each other," he adds.

"Families have the idea that because they're families by some amazing system called osmosis everyone will understand everything that's going on."

Osmosis rarely exists, however. What's more productive is for these family firms which want to stay together to be like the electricians and get involved in some type of forum for family dialogue. There challenges can be brought out into the open and discussed before they create problems.

One of the best ways to do this, says Pervin, is establishing a Family Council. The council is a structured, non-threatening regular meeting in a designated place, where families can use the talents of a facilitator to referee individuals' concerns.

These councils try to separate the ownership of the firm from its management. "They're not dealing with operational issues, but relationships," he adds. "It's a real millstone if you have family members you're working with who are poking at you."

Issues dealt with include defining the family mission or vision; succession planning; which family members should own stock; which family members can join the firm and after what training; sibling rivalry; how to bring in outside managers; and the role of active and inactive family members in the business.

"The greatest opportunity for a family business is improved communication," notes Llewellyn Smith, president of the Canadian Association of Family Enterprise, who has set up a Family Council at E.D. Smith & Sons, where he is chairman. "Families need to it down and say 'why do we have this business, what's the purpose of it, what's the role of family members and what are the individual aspirations of each member?' And they have to revisit this on a regular basis."

Since most people usually get together regularly to discuss things during family dinners and the like, why deal with these matters in such a formal setting?

The basic problem with that "Friday night dinner" scenario and the need for having a professional facilitator sit in, explains Pervin, is to not have the mother or father who has founded the business dominate all discussions and make all decisions.

"You can't be a participant and a leader at the same time," he says. "He or she has to be prepared to transfer authority as well as responsibility for different aspects of the business to successors.

"Take the example where the kids have been in the family business for 15 years and dad is getting on and has a medical problem," he continues. "Often the only place the kids can bring up the idea of estate planning is in the family council because otherwise they feel they're going to appear greedy and as ingrates who want to bump their father off."

"The CEO who is holding all the cards has to agree on the benefits of a democratic, progressive approach to the family business," says Smith. "You have to realize that there are different stakeholders involved."

His firm went through an ownership consolidation a few years ago with the number of family members in the firm shrinking to just him. But with three children, he says "I expect the whole pyramid to start again."

Although his kids are all under 15, they've already been involved in simple business tasks and the oldest has even suggested in the Family Council that he won't be going into the business when he grows up.

Making allowances for decisions like that is another function of a Family Council, explains Pervin. Sometimes a founder will just assume that his children want to take over the business and then be disappointed when they sell it after he retires.

Other times it may be a son-in-law or daughter-in-law who is the best hope to provide leadership for the family firm in the next generation, but it's been decided that only blood relatives can own stock.

Those sorts of situations can also be dealt with at Family Council meetings, as can evolving guidelines that must be followed for any family member entering the business.

In one firm Pervin counseled, successors were fast tracked, "but the rules were clear," he says. Any family member who joined the company had to have a university degree in an appropriate area; had to apply for an already existing job, rather than having a special position created for him or her; had to be voted into the firm by other family members; and was put on a specific career track.

Those sorts of rules don't have to apply to all family businesses, notes Pervin. But the firm's creed must be articulated so everyone understands it.

Setting up the initial stage of a Family Council usually involves having regular meetings every month or two while creating and writing down the family creed, Pervin adds. Once the basics are in place, meetings can then take place quarterly. Eventually, in fact, family members become so used to the concept that the presence of a coordinator is only needed at special occasions.

"The key to working with families is letting them evolve and do things for themselves," he adds.

A good place to have the first Family Council meetings is as part of a one or two day family retreat so everyone is away from the shop floor and ringing telephones, declares Pervin. Everything doesn't have to be all business either. One family schedules its meetings around recreational activities, for instance figuring that having fun together is what distinguishes their firm from others.

"Councils are good for anyone who values perpetuating the family business and values relationships with each other," Pervin notes. And right now since only about 10% of Canadian companies have such councils, there's plenty of scope for growth.

"In 99% of the situations that I'm involved with, a Family Council creates a much stronger business and family because you look at the rules, overcome some of the myths and get rid of all the innuendo and unspoken secrets," he adds.

"You create a much more cohesive family unit, which creates a more cohesive management team, which goes on to create a better bottom line."

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