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How trust and openness help family firms thrive

Define clear roles for every family member to avoid conflict

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Magda Zelickson, Interior Illusions

A well-run family business can be an enduring source of support, wealth and satisfaction.

But all too often conflict undermines not only the company but family unity. Here’s how to keep your family business on an even keel and heading in the right direction.

Magda Zelickson and her family were in a tight spot. Their growing furniture and interior design business, Interior Illusions, was running out of space at its location in downtown Winnipeg. They needed more room to show off their premium sofas, tables and accessories, such as drapes, curtains and blinds.

The family-owned store lacked windows and was tucked away in a spot with little street traffic. But Zelickson was nervous about the huge cost of a move, especially with a recession in recent memory.

Arguing in favour of the move were her husband and long-time business partner, Ken Zelickson, and their daughter Michelle Chisick. Michelle had grown up in the store, working there part time as a teen. She joined the company full time after earning a master’s degree in interior design.

Open discussions

The trio were used to honest and open family discussions about the business. Talking out the move together was what reassured Magda Zelickson it was worth the risk.

When the perfect space opened up in a prominent heritage building in Winnipeg’s historic Exchange District, the family snatched it up. Sales doubled in two years.

The success of Interior Illusions highlights some of the hallmarks of a well-run family business: Trust, inclusion of younger generations and a passion for keeping the family legacy going strong.

Family-owned enterprises are the backbone of Canada’s economy, accounting for four in five of all businesses and employing half the workforce, according to the Canadian Association of Family Enterprise.

Many don’t survive

Yet, just 30% of family businesses survive into the second generation, and only 12% make it to the third, according to a U.S. study.

Challenges often include a lack of communication and intergenerational clashes over decision-making and day-to-day management authority.

Parents often control things and don’t want to share information. The younger generations end up lacking the knowledge they need to understand how the business is doing and what’s involved in running it.

BDC business advisors are regularly called in to help family businesses that have run into trouble due to disagreements. By that time, the business can be in financial trouble.

Family businesses need to get the younger generation fully involved, including understanding the company’s financial information and situation.

The younger generation also often has the technological knowledge, understands new equipment and is often more open minded about what a company can do.

Sharing information is important for building trust and teaching family members how to manage the business.

It’s also important for younger generations to immerse themselves in the company to learn its ins and outs, and earn the trust and respect of parents and key employees. They should especially seek to understand the long hours and commitment of previous generations that led to the company’s success.

As a test of the younger generation’s readiness, parents should take time off and let their children run the business themselves for a couple of weeks. It’s a good experience for everybody, yet it’s not going to put the business at risk.

Grateful for input

At Interior Illusions, the Zelicksons embody many of these lessons. Magda is grateful for her daughter’s input. The two go on buying trips together, and Michelle brought a new line of business to the store by offering interior design services.

Parents and daughter worked closely together to create a strategic plan and overhaul their website. (They hired BDC’s advisory services to advise them on both projects and also obtained BDC financing for their move.)

The Zelicksons are glad to have someone to pass the business on to one day—although not just yet.

Having their daughter around has paid off in another way for Magda and her husband. They’re finally taking an extended vacation—their longest time away since they founded the business 31 years ago.

4 tips for family businesses

The keys to a successful family business are trust, openness and the involvement of younger generations, says BDC’s Bettie Johnston. Here are some tips.

  1. Involve the entire family in strategic planning—This builds consensus for the company’s vision and a roadmap to the future.
  2. Define clear roles for each family member—This gives everyone their own space, especially important for a couple working together, and lets them work in the area of the business best suited to their talents and interests. It also lets family members avoid stepping on each other’s toes, which can help keep any internal rivalries in check.
  3. Give younger generations a venue to share their ideas and a role in decisions.
  4. Encourage children to work elsewhere for a few years before they join the family firm&mash;The experience will teach them skills, give them a new perspective and earn them respect from employees.

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