Explore the intricacies of crisis management in family enterprises, where resilience, conflict mitigation and legacy protection are essential to navigating turbulent times. Crises—whether internal conflicts, unforeseen events or leadership disputes—can disrupt critical processes like succession planning and decision-making, challenging both the stability of the business and the harmony within the family. In this episode, host Leah Tolton is joined by Bennett Jones partner James Heelan to share insights on guiding family businesses through these critical moments.
At the heart of managing crises is a resilient business culture. Building such a foundation enables family enterprises to face both internal challenges and external pressures with confidence. A key strategy is stakeholder mapping, which provides clarity on the unique family dynamics, ownership structures and business relationships that shape long-term success. Equally vital is the balance between preserving legacy and embracing change, honouring traditions while adapting to new realities to secure the business’s future.
Preventative measures, such as regular check-ins with trusted advisors, play an invaluable role in crisis management, underscoring that proactive steps often avert more significant issues down the road. Additionally, private resolution avenues allow families to address disputes discreetly, protecting their reputation and preserving important relationships. These strategies offer family businesses a path to unity and resilience, even in challenging times.
Transcript
James Heelan: [00:00:00] In the end, the culture of any business is king. I really do believe that because if you don't have paper, but you have a really good culture and a really good understanding among everybody and you have a crisis situation, you know, like you can have manufacturing dog biscuits and it turns out that that's, you know, they're tainted in some way and you have to do a recall, that's a crisis from outside of the business. And, you know, how you react to that is going to really be important. And culture, I think, really comes into play. So, I would start with the culture piece and making sure you have alignment.
Leah Tolton: [00:00:43] Welcome to Beyond Succession, a podcast series within the Bennett Jones Business Law Talks podcast that discusses topics around navigating the complexities of the family enterprise. I'm Leah Tolton, partner at Bennett Jones LLP, and I'm a family enterprise and corporate lawyer, passionate about helping family enterprise businesses navigate the complexities of governance, succession and growth.
Before we begin this podcast, please note that anything said or discussed on this podcast does not constitute legal advice. Always seek proper advice from your legal advisor as every situation is different and outcomes can vary. In today's episode, we're tackling a critical and sometimes daunting topic, crisis management for family enterprises.
It's no secret that family businesses are built on a unique foundation of personal relationships and shared legacies. But when a crisis strikes, whether it's internal conflict, an unforeseen event, or a leadership dispute, it can throw the entire process into turmoil. Joining me today is my colleague, James Heelan.
James is a partner at Bennett Jones and leading lawyer in the areas of corporate commercial litigation and employment law. I'm excited to have James on the podcast because of his extensive experience with crisis situations and helping his clients through the process. Welcome to the podcast, James.
James Heelan: [00:02:16] Oh, thank you very much. It's great to have a chat with you today.
Leah Tolton: [00:02:20] It seems to me when one is dealing with a crisis in a business context, it's important to understand who has an interest in the outcome of that crisis. So, how critical is it for organizations to understand who exactly are the stakeholders when it comes to potential crises?
James Heelan: [00:02:41] Yeah, that's one of the first things we turn our mind to. And Leah, as you mentioned, I'm a litigation lawyer. And so you're probably the last guy that, that a family wants to meet because it means that we really have sort of hit crisis mode. And one of the first things I want to find out is, uh, you know, who's my client, who owns this business, who runs this business.
And sometimes it's fascinating to me that what I'm told is different than what I read. The paper reflects a different story. Often that's because a lot of the business has been run on trust and goodwill. And the documentation that exists is, is out of date and doesn't reflect the reality. And then the question becomes, who are the stakeholders in all of this?
Because, you know, you may have a situation where, you know, the traditional situation where dad starts a business as a young man, builds this very successful enterprise and now his children are running it, but on paper, he's still the owner, but he's off in Palm Springs six months of the year.
And so in that case, the stakeholders are the children, the father, there may be some people who have a interest in the business, rely on the business, but have nothing to do with the business. So there may be children who benefit from the business, but are not active participants. So, we need to sort through all of that as a start and figure out, you know, who's who in the zoo, so to speak.
Leah Tolton: [00:04:10] And so you've touched on three things in your comment there that I am always interested in from the perspective of the family enterprise. You've talked about people who are in the family who may or may not be in the business or own the business. You've talked about people who are owners of the business, whether they're in the family or not, and you've talked about the business itself, which may, uh, have some people working in it who are family members, may have some other, uh, stakeholders who are not family members. How do perspectives in those different groups vary? And what do you need to do to align those views when those perspectives aren't aligned?
James Heelan: [00:04:48] It's a challenge because when we're dealing with family businesses, there's all the family dynamics at play as well. And so it's really important for us to get a good understanding of the family dynamic. And so it can be really challenging to reconcile. And, you know, sometimes it means that we, we determine that there's different interests where maybe they need different counsel.
There's some caution that needs to be brought to bear in some of that, because that can sometimes not be very well received. And there's the sense that maybe the, you know, we're turning an adversarial situation even into a more adversarial situation. So, it really is important to, uh, again, have a good understanding of, you know, who is my client?
Is the company my client? Am I acting for the shareholders? I'm acting for some of the directors. And it's important to have experienced counsel who can really unravel all of that and try to unravel all the interests to make sure that people are best taken care of and we hopefully, you know, move along a path where avoiding some, you know, significant pieces of litigation that that's, you know, contrary to the reputation I think some, you know, sometimes lawyers have, which is they're just looking for a fight. Most good litigators are looking for the solution right out of the gate. I like to think that that's the approach we take.
Sometimes you have to have the fight. Sometimes you have to threaten the fight to get the resolution. But ultimately right out of the gate, I'm thinking about how can I solve this problem, but I need to understand fundamentally what, what's the big problem within the business or organization. And then what are some of the other underlying issues? Because sometimes in the family business, people are motivated by things other than the obvious issues. There's something else going on and we have to decipher that.
Leah Tolton: [00:06:45] You know, you've been talking about stakeholders that are in the family. You've been talking about stakeholders that are in the business. You know, it occurs to me that there could be people who have an interest in the outcome of the crisis who may not be in any of those roles. You know, I think about things like banks or clients or things like that. And I wonder how those parties play in crisis situations or what interests them. They play or have in crisis situations and how those should be managed.
James Heelan: [00:07:13] Well, it's sometimes, you know, we think about the banks, for example, you know, sometimes they get sort of forgotten. And so you have a situation where let's just imagine that the CEO of a, of a private business is walked out the door. There's been some misconduct and we've now got this crisis because that CEO happens to be a member of the family and has the banking relationship and the bankers know him or her and imagine that, uh, the business is having cash flow issues and maybe they're offside their covenants with the bank and maybe the bank has been able to, or has been prepared to just kind of ignore that for the moment, but now that that person isn't around anymore, yeah, there's a problem. And so if we get called in on that, for example, to deal with that executive termination and the fallout from that, it's important that we're exploring all of the consequences. It's not just you're going to terminate someone. You're going to pay them severance or not. You're going to have to maybe redeem their shares or not, depending on the circumstances.
But there are these third parties that, you know, where, where there's consequences. And I think about, you know, businesses that have a private share plan with their employees, where their employees get to or profit-sharing arrangement with their employees. And sometimes that those employees have a representative who, who has some nominal role on a board, you know, some of those dynamics might come into play. So sometimes these things look like a very obvious problem. And there's another element to it. So you're right, I think we do have to be thinking about those third parties that, uh, you know, may have something to say about all of this.
Leah Tolton: [00:09:03] There can be a lot going on here. You know, based on what you described, there can be issues that are taking place or that affect members of the family. There can be issues that affect the ownership group. Obviously the business is impacted, maybe even people outside of the business. So I imagine it can be difficult to find some clarity in that whole scenario. So my question for you is, you know, for organizations, how does having clear values, mission and philosophy help mitigate the impact of a crisis on these organizations, given the confusion that can arise?
James Heelan: [00:09:40] Well, I think first of all, trying having alignment. Of common interests and is paramount, right? So in the end, the culture of any business is king. I really do believe that because if you don't have paper, but you have a really good culture and a really good understanding among everybody and you have a crisis situation, you know, and we've talked about sort of crisis is from within.
A little bit of my analogy where you have a CEO, you know, uh, is walked out, but you can have crisis from without, you know, like, you can have manufacturing dog biscuits and it turns out that, you know, they're tainted in some way and you have to do a recall. Uh, that's a crisis from outside of the business and, you know, how you react to that is going to really be important, obviously, and culture, I think, really comes into play.
So I would start with the culture piece and making sure you have alignment and sometimes again, within the family dynamic, that can be difficult, or it can get away from you. You think you have a certain culture and it turns out you don't obviously, you know, we're two lawyers, so we'll convince each other of this.
The paper is so important. It's so important to put it down and it's so important to put it down when everyone's getting along and also not leaving it too long. You know, unfortunately, I've seen it where it's been left too long. And now, you know, the senior members of the family are no longer have capacity or interest.
And so, I say culture is king. I believe that. Maybe the queen is the paperwork. Um, and sometimes, you know, those are interchangeable.
Leah Tolton: [00:11:24] And so, you know, that leads me to another question here. And I'll never disagree with you about the importance of the paper, obviously. But you know, is that the only way that organizations like family enterprises can ensure their values guide decision making during a crisis, even under pressure? Like, is that the only way? Is that the best way? Are there other things that we can recommend to them?
James Heelan: [00:11:47] You know, I think at the right point, and it has to be done in a way where you're moving people towards success. You know, my experience has been, I often will interview a number of people within the family privately, and try to understand their perspective on whatever we're dealing with and then put everybody in a room, but only when it's right.
And I think there's real value in transparency and guided communication, but it has to be done in a way where it's carefully managed because it can be a disaster if it's not. I mean, again, all of those dynamics I've talked about can come out at their worst, you know, I think with some help, we can guide people through that, you know, sometimes I'll bring in a real crisis manager.
So, you know, obviously, I'm, I'm dealing with the legal aspects and, but there's sometimes when we're getting into a, you know, a PR issue that was sort of out of my pay grade, we have people that we'll use to bring in for that. You know, I mentioned the tainted dog cookies. I mean, we, we have people who can come in and help us manage the PR on that.
Sometimes there's a government relation issue. We can bring people in for that. So what's really important is to have a quarterback - someone who totally understands what's going on, understands the family, the business and is driving, you know, the team and pardon the sports analogies, they're overused sometimes, but driving the team down the field.
And as lawyers, I, I like to think of us as the quarterbacks with all of that.
Leah Tolton: [00:13:26] So, you know, let's, let's use that analogy as we move from talking about who the players are and what their interests are and how we manage those. And then talk about, what we do after we have got the picture and we have figured out exactly what took place here and we're now evaluating the impact of it.
So, immediately after a crisis, what are the most important steps for assessing both the personal damage and the business-related damage that may have arisen as a result of the crisis?
James Heelan: [00:13:59] I mean, the first thing is, okay, well, what's the solution. So we're trying to find the solution. And again, we're sort of speaking the abstract here, but, you know, we may have a crisis because we have a cash flow issue, because one of our major contracts cancelled on. So let's use that as an example. The first thing is, is there, is there a litigation solution? Is there a legal solution to that problem? And how do we implement that? And that becomes the initial focus. And again, one hopes that by using a legal process, we can get a quick resolution to that problem. And when the dust is settled on litigation, whether we've actually gone forward with it or settled a case.
You know, one of the things I often do is have a little debrief and say, okay, we've been through this crisis. Now the dust has settled. Let's talk about what we need to do to avoid having this happen in the future. And, and a lot of my, you know, clients, particularly my institutional clients, mandate that we have to have a debrief at the end of every, every piece of litigation or every arbitration or mediation or whatever the process might be.
And we sit down and kind of do a learning and we, we try to do that within about a month. We try not to do it immediately right after, cause there's still some raw feelings and we try to do it in a way that's respectful and, and open. And that includes evaluating the strategy that we recommended because.
You know, we want to learn from that as well. And, you know, I found that to be invaluable. And then what happens is people make adjustments with how they run their business or how they paper things so that the next time around, whatever gaps we've identified are filled in.
Leah Tolton: [00:15:51] You know, you've talked a bit about, you know, the post mortem, shall we say, uh, in the business context and, you know, you mentioned some issues that may arise or some sensitivities that may arise in the family context.
You know, I wonder how much of what occurs in that context relates to reputation damage or damage to legacy. Do you ever see that coming up in these conversations and how can we manage that?
James Heelan: [00:16:16] Sometimes that's the unsaid thing, right? We think we're dealing with all these different problems. And really what, what it's all about is, you know, one generation wanting legacy ‘A’, and the next generation not interested in that, right?
That gets back to the cultural piece, like, where are we aligned? And, you know, sometimes, quite frankly, it's the younger generation chomping at the bit, wanting to get on with things. And the older generation hanging on, and I don't mean to be pejorative about that because maybe there's good reasons for the older generation to be hanging on, or maybe not.
And so legacy is an important part of this. I think, like many things in life, having people feel good about themselves is important and feel good about what they've done and how they contribute. You know, unless you're a sociopath, we all kind of want to be loved and, and we want to be appreciated and feel like we're contributing.
And so we need to find paths to maintain that and maintain sort of dignity through these processes. Sometimes the family crisis. Gets to a point where people can't share a turkey. That's always sad. It's reality. But I always sort of, I say to people, you know, one day, I'd like you all to be able to have a Christmas dinner again together and want to be mindful of that.
Now, that doesn't mean that it's all kumbaya and we're just going to do anything to get along. Because that's not necessarily a good thing either, because maybe then we're not making the right decisions and being firm minded about what we need to do. But I think legacy, I think how people feel about what they've built, those are all really important things that we have to, to bear in mind.
And, you know, it's a little different when you're, I mean, obviously a big, big company worries about their reputation, but not in the same way. It's not as personal. And, you know, if you're the CEO of a big bank, there'll be another CEO coming around and they'll have their different ideas. If you're the CEO of a business that you've been running for 40 years and built for nothing, that's a very different emotional attachment.
And if when you walk in every day, you look down the hall and it's your five children who are helping you run that business, it's a very different story, right?
Leah Tolton: [00:18:41] Yeah. So, you know, you've been talking a bit about the debrief and the, the lessons learned and coming up with strategies on a go forward basis. What do we do now? What do we do next? What do we do if this happens again? What strategies can organizations use to remain flexible and responsible to, you know, these evolving crises without making hasty or reckless decisions? You know, I, I can't help but think that if really an underlying issue is legacy and reputation, that people may react quickly to preserve that, you know, are there strategies that these organizations can employ in order to, you know, maybe apply some more deliberation and more, some, some more intention to what it is that they employ by way of an action plan?
James Heelan: [00:19:30] Absolutely. I, you know, I really, I think about my financial advisor who I see every six months or so, and we do a little tune up. I go to see my doctor every year and, uh, there's a check in and we see how things are going and, and there's a comparison of how, you know, how, how I was last year, it's the same with managing your business. And I really believe that a lot of these issues can be avoided if someone like you, Leah, has a regular ongoing, not a one off, but a regular ongoing relationship with the business. And so there's a check in maybe every six months or every year, and maybe at the start, the first time around, there's some real, a much more deeper, a much deeper dive and maybe some facilitated discussions where again, when people are getting along and where there is no crisis, you're preparing for that day.
Preparing for succession, preparing for transition, and, you know, you've seen it, I'm sure, the succession plan sounds fantastic. Turns out the person who, who is inheriting the, or being handed the baton wants nothing to do with it. And, and that finally comes out when the day comes. And so that's a discussion that's much, much more important. More easily had when everyone is still interested and engaged, if the CEO is no longer with us, and the new appointee really doesn't want to be involved, that's a problem. Or if, if there's a misunderstanding about who is taking over because the CEO or the owner, the founder has been vague, that's a problem.
And so having a deep dive with someone like yourself, had that regular visit. I think those are really important things and now you also have a lawyer who's intimately familiar with your business and can quarterback you through whatever may come up.
Leah Tolton: [00:21:33] Yeah, and obviously I don't disagree with anything you have to say, but I would like to pick up on, I think, what would be an interesting distinction. And, you know, you're talking about, you know, checking in with someone like me and for those people who are listening who may not be aware, you know, my practice focuses on the corporate and the planning piece. And as we said earlier in this episode, you know, you're someone who comes in really when there is a crisis, you know, and perhaps we are heading toward litigation, but I'm really interested in the fact that even though we come from that different perspective, we still value the importance of regular check ins, developing relationship, you know, ongoing health checks, so to speak, in terms of everyone's awareness and alignment on what we're going to do, how we're going to handle things, how we make decisions, and real clarity around that. I would have expected, quite frankly, that we might have had some differences on that, but it's very interesting to me that we're really quite aligned.
James Heelan: [00:22:28] Well, I mean, we talk about culture. It's the cultural of our culture of our firm. I'm happy to get into a fight and run to court if that's what it takes to help our client. But, you know, a lot of the times that's not what it takes to help our client. It's actually finding solutions outside of that path, which gets back to my earlier comment, you know, litigation.
A good litigation lawyer, some of our greatest successes, we can't tell anyone about because they're not in the public domain. And we privately have resolved problems and help people resolve problems. And those are some of the cases. I'm especially proud of where, you know, I've used, for example, private proceedings.
Most of your listeners will be familiar with the courts. We hear about them all the time. That's very public. It's transparent. Everything that's said in court can go on into the newspaper. A private arbitration is just that, private. It's kept between the parties. It gets back to that legacy piece. We can avoid having a public airing of, of a dispute between the family and there are tools and mechanisms that we can use to privately resolve disputes. You know, what better way to think about the dispute they will be until well before it happens. So back to the paper, we can all agree beforehand how we're going to resolve a dispute and we can agree that it will be through a private arbitration and we can even agree that we have a trusted advisor that we're going to use to referee that dispute. And, you know, there's been times I've been involved where we've called in a psychologist. You know, we've agreed that that's how we're going to solve the problem. If something comes up or, you know, someone who is, uh, an expert in, you know, industrial relations like there's, there's so many ways that we can help people, but it's a lot easier if it all happens before the proverbial thing hitting the fan here.
Leah Tolton: [00:24:25] So, you know, I was going to ask. you a question about, you know, the role that lawyers and other external advisors can play in strengthening an organization's crisis management capabilities. But I think I could summarize your answer to that based on the comments that you've made. You know, you could have a lawyer or external advisor act as a sounding board on a regular basis.
You could have them act as an advisor in terms of mechanisms that, you know, would be good to think about in advance before the crisis hit. A role to play in terms of perhaps sounding out individual perspectives and getting their sense of how things came about and perhaps take those perspectives and apply them to the lessons learned.
You could provide some feedback and evaluation role based on feedback received after a crisis and perhaps even before. You could take them through processes either of negotiating their own rules about how a crisis will be managed. Or take them through processes that are formal to resolve them, whether they're private or public. How's that for a summary?
James Heelan: [00:25:28] Yeah, it's a great summary. And, and, you know, the, the great thing about using someone like myself or yourself to navigate all of this is, especially in my situation, I am bringing to the table all of the problems I've seen over 30 plus years. It's why you have to keep your sense of humor when you do what I do, because basically that's all I deal with are problems all the time. And the clients really benefit from that because they see their little world, but I've, I see a lot more. And so we have, we have that opportunity to, to share with them some of the learnings that we've, you know, we've taken from helping other clients through problems.
Leah Tolton: [00:26:07] Right. That's a great summary. Thanks for that.
James, I so appreciate you taking the time to speak with us today. I am sure that our listeners have gained a number of gems of wisdom from you, and I thank you for sharing those with us. Thank you for appearing on the podcast.
James Heelan: [00:26:24] It's been my pleasure. Thank you very much.
Leah Tolton: [00:26:26] Thanks for joining me on this episode of Beyond Succession, a series within the Bennett Jones Business Law Talks podcast.
Make sure to hit the follow button on whatever platform you are listening from so you get notified whenever we release new episodes. Also, don't hesitate to reach out if you have any questions about challenges or issues that you are facing in your family enterprise. Take care. I'll catch you in our next episode.
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