Kyla A. Baxter, President of Baxter Structures, poses for a photo in her partially renovated office in Toronto, Ontario, Canada.Deborah Baic/The Globe and Mail
When her father died, Kyla Baxter suddenly found herself running the family firm on her own. "It was a shock," the 38-year-old Ms. Baxter says, noting that, with his passing a month ago, she lost both a beloved parent and business partner.
But as difficult as it has been dealing with the personal grief, moving forward with the business has been a smooth and even "positive experience," she says.
That is because her father, Bob, had been slowly preparing for her to take over his Toronto-based company, Baxter Structures, which specializes in preparing structured insurance settlements, ever since she joined the company 15 years ago. And over the past two years, she had been taking a more active role in the firm, dealing with the daily operations, as he eased into a more hands-off consultant role.
"From the moment I started, according to my father, the succession plan has been in effect," Ms. Baxter says. "His dream was to have - and I'm sure it's every father's dream to have - their child take over the family business. The bonus with me is I love it. I have a passion for it as much as he did."
Taking over the family business isn't always so seamless, however. The loss of a matriarch or patriarch is often the most difficult challenge that companies - not to mention family relationships - face.
Even though about 85 per cent of founders believe that their children will take over when they die or retire, only one in three family businesses survive the transition into the hands of the next generation, according to U.S.-based The Family Business Institute.
Given such statistics, it's no wonder that observers are anxious to see how the sons of New York Yankees owner George Steinbrenner will carry on the family-owned franchise.
After Mr. Steinbrenner's death last week, company executives have maintained that there are no intentions to sell the team and no succession issues. But some are questioning whether Hal and Hank Steinbrenner have the same passion and business savvy as their father.
Similar doubts apparently worked against Edward Rogers, son of the late Ted Rogers, when he was denied the role of chief executive of the company his father founded, Rogers Communications Inc., in early 2009. His rival, Nadir Mohamed, a Bay Street favourite, was picked for that job. Mr. Rogers was later named deputy chairman.
Alternatively, as Leonard Asper, former chief executive of CanWest Global Communications Corp., discovered, taking over the family business can also mean inheriting the previous generation's troubles. When Izzy Asper died in 2003, he left his son with a company mired in debt.
The Family Business Institute's president, Wayne Rivers, says one of the biggest reasons family businesses fail to survive into the second generation is that founders tend to be unrealistically optimistic about how well their successors will carry on.
"Any entrepreneur who's still successful in business at age 65, let's say, has overcome hundreds and hundreds of challenges both great and small," Mr. Rivers says, noting that they are conditioned to believe that their successors will be able handle the challenge of taking over.
"It's hard for them to prepare the next generation for all that's to come because they're doers. They're typically very hands-on and they're not very good teachers or mentors, so they just say, 'Well, roll your sleeves up and just do it,' because that's their style. That's what they've always done."
Moreover, he says, the children of successful entrepreneurs generally have enjoyed a more affluent upbringing than their parents, and, thus, often "don't have the same passion for the business or the same sort of entrepreneurial hunger."
Meanwhile, the greatest issue that children face when stepping into their parents' shoes is managing their siblings after a lifetime of being taught that they are equal, Mr. Rivers says. That equality, however, doesn't carry into business, where one child may be more talented, more experienced and more ambitious than another, which can cause a great deal of strife.
Mr. Rivers says that if siblings can't come to a meeting of the minds, firing a brother or sister may be necessary for the sake of the company and maintaining family harmony.
"We call it pruning the family tree," he says.
A lack of communication and a lack of a strong governance system that enables decision-making also spell disaster for family businesses, says Kelly LeCouvie, a Toronto consultant with U.S.-based The Family Business Consulting Group.
According to the Canadian Federation of Independent Business, only 10 per cent of small-to-medium-business owners have a written succession plan, while 38 per cent say they have a plan but do not have it written down.
One reason succession plans are not clearly communicated is that children are often reluctant to approach their parents about the issue for fear of appearing greedy or being misinterpreted as wanting to push their parents out, Dr. LeCouvie says.
"It's an emotional process to talk about these things with people you love," yet it's crucial to do so, she says.
Ms. Baxter, for one, is grateful that she and her father were able to work out how she would take on the family business, and she says she benefited from his mentorship and guidance before his passing. As a result, she says, many clients have expressed relief that she is carrying on the business.
"Our motto has always been, 'You fail to plan, you plan to fail,' " Ms. Baxter says. "... I'm never going to say it's an easy process in terms of losing a partner/parent, but it certainly has made it manageable."
And, importantly, she adds: "The family is still intact."