Sunday Special: Family ties

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Andrew Paterson bought out the other family shareholders in Paterson GlobalFoods. The fewer the shareholders, the fewer the complications, he says. (KEN GIGLIOTTI WINNIPEG FREE PRESS)

IF you’d like to be a fly on the wall for the most crucial meetings in corporate Winnipeg, you’re just as likely to get the goods around the dining room table as at the boardroom table.

Winnipeg would hold the title, if there were one, as the family-owned business capital of Canada.

 You know many of them -- James Richardson & Sons, Ltd., which is run by the Richardson family, Canwest Global Communications (the Asper family), lottery ticket producer Pollard Banknote Ltd. (the Pollard family), real estate management firm Gendis Inc. (the Cohen family), the Birchwood Automotive Group (the Chipman family), McNally Robinson Booksellers (the McNally family), Dufresne Furniture (the Dufresne family) and Palliser Furniture (the DeFehr family).

Others, such as agri-food firms Parrish & Heimbecker (the Parrish and Heimbecker families) and Paterson GlobalFoods (the Paterson family), fly under the radar screens of most people. And for every public or privately held company that employs dozens or many hundreds of people, there are countless mom-and-pop shops in Winnipeg that have been passed down through the generations.

Winnipeg's size, compared to centres such as Toronto and Calgary, means it is home to fewer corporate head offices. Those are often larger firms and those kinds of companies tend to have less direct family involvement.

Lawrence Barns, CEO of the Canadian Association of Family Enterprise (CAFE), said while the economic engine of virtually every city in Canada is the family-run firm, Winnipeg is unusual because so many of the largest companies are majority-owned by local clans.

"The Richardsons and Aspers run two of the most established businesses in the country. If you came to Toronto and looked up the top five corporations, you'd find banks and insurance companies," he said. "In the central part of the country there is obviously a very strong family ethic. It's stronger there than in urban areas because of the bond with the land and the agricultural history of the area."

Ross Robinson, president and CEO of B.A. Robinson Co. Ltd., a retailer of lighting and plumbing products, hypothesizes the long time spent indoors during the winter gives Winnipeggers plenty of time to scratch their entrepreneurial itch.

"We grew up with a very entrepreneurial father, so it's part of our DNA. It's hard to describe. The Asper family has been very successful and I'm sure the whole family learned from Izzy at the kitchen table. Maybe we spend more time together as family and because of that we have a great centre for family enterprise," he said.

Every family-run outfit possesses a dynamic all its own, a reflection of the family itself. While their strength is often a product of the family's values and ability to work together, an inability to pull the oars in the same direction can often lead to an ugly breakup.

That's particularly true when it comes to passing the torch. While the founders have a clear vision of their companies and where they're going, that unified view tends to break down over generations as some siblings and cousins step up and take control, others sit back and collect dividends, and still others are content to complain from the sidelines.

Reg Litz, a professor of entrepreneurial studies at the Asper School of Business at the University of Manitoba, said maintaining a business from generation to generation can be a nightmare, as it's difficult to maintain the delicate balance between the interests of the family and those of the business. He said 30 per cent of family-run firms successfully transition to the second generation but only 10 per cent make the jump from the second to the third.

"I don't think there is a simple relationship between family involvement and business profitability. Sometimes it may help but overall I wouldn't bet on it," he said.

Andrew Paterson, CEO of Paterson GlobalFoods, a Winnipeg-based firm in the food, transportation, finance and construction businesses, said he believes the secret of success for family firms is having as few shareholders as possible, preferably just one. This is never more evident than during times of crisis.

"When you have a lot of shareholders, you have a lot of complications, such as succession issues and family matters. Can you imagine if a company was having financial trouble and two partners were going through a divorce and the third one skipped town?" he said.

Paterson's firm, which was launched by his grandfather Norman 101 years ago, has had a number of owners over the past century. His father and uncle were partners together, followed by Norman's four grandchildren. Andrew eventually bought them all out. Today, the company employs more than 500 people and last year it had annual sales of $973 million.

David Asper, executive vice-president of Canwest, said there's no question family businesses have their ups and downs. He and his siblings, Leonard, the company's CEO, and Gail, its corporate secretary, have taken the advice of family-business experts so they can manage the company, keep it focused and move it forward. He said the biggest challenges tend to result from communication problems that are left to fester. "The closeness of the siblings or between the parent and child where things are left unsaid can become a real problem. The best-run family businesses are those where there are formal and informal processes for communication and candour but without undermining the business. It's a critical component," he said.

Asper said he and his siblings keep focused on the tasks at hand and never let things from years ago -- such as childhood disputes -- get in the way of what's best for Canwest.

"You've got to compartmentalize. We try to use how mischievous we were as kids as a threat to how mischievous we could be today if we wanted to be. You've got to be humorous about it," he said.

Asper said it's just as critical for the company that non-family members feel at ease when voicing dissenting opinions that they won't get shot down. Or worse.

"People around you need to feel equally safe. There's nothing wrong (with different opinions). It's a good thing. That's the culture my father (Izzy) took great pains to install in the company. People can stand up and be heard without fear of repercussion," he said.

Robinson is proud of the fact he and his brother, Bruce, were the architects of a successful slicing of the family business, which was founded by their father, Burton, in 1936.

They were partners for 25 years but decided to go their separate ways in 1999 so their own children could get involved. Bruce owns a pair of Robinson Lighting locations, one in Winnipeg and another in Kelowna, B.C. Ross, who has expanded significantly in the decade since the split, now owns 20 outlets across Western Canada.

"We still go for lunch every week or every other week. He has his family business with his two kids and I have my business with my family. While that may be perceived as negative, it's actually positive," he said.

John McCallum, a finance professor at the U of M, said one common characteristic of Winnipeg's many family businesses, along with a few high-profile leaders of other firms, is that they share an intense commitment to the province.

"They're Manitobans, they want to be in Manitoba and run their businesses in Manitoba. There is not remotely the same intensity to do it in their own geography (in other parts of the country). Manitobans want to do big things and they don't want to leave town to do it. Their attitude is, 'You can do it here and still get to the lake on Friday,"' he said.

What really stands out, McCallum said, is the camaraderie among the many family patriarchs and matriarchs.

"They are intensely committed to helping, promoting and cheering on each other. You would never get that in Toronto. I think it's amazing that these guys are as fired up about others' success as their are about their own success," he said.

geoff.kirbyson@freepress.mb.ca

Creative core

According to the Canadian Association of Family Enterprise, family-run enterprises are one of the driving forces of the economy. They are responsible for:

50 per cent of Canadian GDP;

70 per cent of new job creation;

With 70 per cent of owners planning to retire in the decade, they will also prompt the biggest transfer of wealth the Canadian economy has ever seen.

Family feuds

There is no shortage of family-business implosions in Canada. For example, the Molson family, whose brewing history dates back more than two centuries, had a public power struggle at its annual general meeting in 2004. Different family factions were on opposite sides of the company's merger plans with U.S.-based Adolph Coors Co. Ian Molson, the former deputy chairman of Molson, even attempted to acquire the Canadian brewing icon from the other side of the family.

Then there's the McCain family, which is famous for its french fries and nearly as well-known for a spat between brothers Wallace and Harrison McCain. Wallace wanted his son, Michael, to take over the reins of power when the brothers stepped back, while Harrison preferred to bring in outside management. The fight ultimately ended up in a New Brunswick court, which sided with Harrison. Ousted from the company, Wallace subsequently took over Maple Leaf Foods with his two sons.

Republished from the Winnipeg Free Press print edition June 7, 2009 A8