Handing Over the Keys to the Company

Avoid the common pitfalls faced by intergenerational ownership and management structures by learning from the O’Regan family’s award-winning approach to to succession planning for automotive empire.

by Robert Martin

While the Irving family of New Brunswick has been hogging the headlines about the alleged succession issues arising within its multibillion-dollar empire, the fact is that many family-run enterprises across Canada are facing the same situation. So if you want to avoid discord and ensure both the business you’ve built and the wealth you’ve created in your estate remain intact, keep reading. 

According to John Fast, the founder of the Centre for Family Business at the University of Waterloo in Kitchener, Ont., planning for the time when founders are no longer in control is the hardest management challenge faced by heads of family-owned businesses, especially if the head is male. Let’s face it—guys hate to let go. That’s why Fast says the Dartmouth, N.S.–based O’Regan clan of auto-sales renown is exceptional. They’re doing it early, and they’re doing it right.
 
Perhaps it’s because Paul O’Regan is a cautious man. Despite the fact that the dark wood top of his boardroom table is already protected by a sheet of glass, he carefully places a coaster under a glass of water during our interview at his Chevrolet-Cadillac dealership
in Halifax. Cautious, yes, but not calcified; he’s a self-described risk taker who assesses every scenario carefully. On a shelf near the boardroom table, there are plaques offering words of wisdom. “Read this,” says one. “When you’re through changing, you’re through.”
 
It is this balanced approach to life and business that led the O’Regan brothers—Paul, 63, and Stephen, 67—to embrace succession planning early. Between them they have eight children, five of whom are directly involved in O’Regan Holdings Ltd. or its many car dealership subsidiaries (see “The players” on page 32). The O’Regans sell 11 different brands of new cars at 11 locations in Halifax, Dartmouth, and Bridgewater, N.S., but the holding company also controls a used car centre in Halifax (a second one is under construction in Dartmouth) and car detailing, repair, and leasing businesses in the three locations.
 
Although the five O’Regan children represent the third generation of the family involved in the business, there hasn’t been a true succession yet. Paul and Stephen’s father’s involvement dates back to 1915, when Stephen Ernest O’Regan acquired a Ford dealership in Parrsboro, N.S. “In 1956 he closed out the business when the new Trans-Canada Highway was routed through the Wentworth Valley and bypassed the town,” says Paul. All three of Stephen Senior’s children, including the boys’ sister, Mary, went to St. Francis Xavier University in Antigonish, N.S., and began their own careers. Stephen became an engineer, Paul a high school teacher, and Mary a university professor.
 
The brothers had worked odd jobs at the dealership at their father’s insistence, but neither took the work too seriously at the time. Paul remembers that they were excused to play sports, so both took out junior memberships at Parrsboro’s nine-hole golf course. But they got enough of the bug that they were drawn back into the industry after Paul turned a personal tragedy into a career change. In June of 1973 he took a year’s leave of absence from teaching to help care for his third son, Danny, who was so ill that he had to go to Toronto frequently for treatment.
 
“Danny died that September, and I was left with a whole year off work,” says Paul. “So I rented a defunct gas station from the Irvings at the corner of Thistle and Maple streets in Dartmouth and hired one of my [former] students.” He never went back to teaching. By 1981 business was good enough that Stephen left Nova Scotia Power to join Paul and run the leasing side of the business. In 1985 the O’Regans and a third partner, since bought out, acquired Scotia Chev-Olds, now O’Regan’s Chevrolet-Cadillac.
 
From that point on, O’Regan’s rode the wave of foreign-dealership growth during the 1980s and ’90s, particularly with the Japanese, who weren’t as fussy as their North American counterparts about limiting the number of dealerships one owner could operate. That’s how O’Regan’s ended up being the sole Toyota dealer in Halifax, Dartmouth, and Bridgewater.
 
Despite the blur of expansion and acquisition that continues to this day, Paul, like his father before him, took time to consider the future. He saw not a highway bypassing his business but a spaghetti junction of competing family interests headed on a collision course. That’s when he became a convert to the John Fast school of succession planning, an exercise that, despite the consultant’s name, is slow. What follows on the next few pages is a step-by-step itinerary of the O’Regan’s succession-planning journey.
 
1. Formalize the process.
The O’Regans learned early on that success can breed challenges when it comes to running a family business. As early as 1992, Paul hired Reg Craig from the Maritime School of Social Work “to help us work out some issues,” he says, “like what was going to be the structure of decision making.”
 
“We had to learn to park our egos at the door,” adds Paul, wisdom that has served them well as more of their children became involved in the business. Between the two brothers there are eight children (all, Paul notes, St. FX grads like their fathers). As a result of their early experience of getting help to work through personal issues, the two looked at succession planning as part of the normal business process.
 
They wanted the children to be evaluated just like other employees. They had realized early on, when staff jumped from 12 to 108 with the acquisition of the first dealership, the importance of managing human resources, and, according to the company’s website, O’Regans became one of the first car dealers in Atlantic Canada to run its own HR department. But as succession-planning counsellor John Fast puts it, “when Paul asked his senior management to do performance reviews on his kids, they quickly decided that it might be a career-limiting move. That’s when I was called in.”
 
2. Hire a consultant.
Lawyers and accountants are all necessary members of a succession-planning team, says Fast, but for a family in a complex situation like the O’Regans—two brothers, five employee-children, 17 direct relatives, 11 dealerships in multiple locations—the team needs a quarterback. Stephen O’Regan agrees: “John Fast’s philosophy of succession planning is that the legal and financial parts are the easy ones. The more difficult part is the emotional side. If that can be massaged and worked out, then the legal and financial parts are relatively easy.”
 
3. Define success.
“Paul and Stephen are exceptional about values, especially family values,” says Fast. “Optimizing family health is more important to them than the business.” Many families, he adds, believe that keeping the business going is more important because that provides their living, but it’s a case of the tail wagging the dog. Many families fall apart in a fight for control and sometimes destroy the business in the process. The O’Regans defined success as keeping the family together, but in order to do that everybody’s role, both in relation to the business and to each other, had to be clarified. That proved to be the hardest part.
4. Clarify roles.
“It was painful,” admits Stephen. What started as a performance review for a few employee-children morphed into two complex parts: a 360-degree review involving comments from superiors, peers, and people reporting to the children; and full personality profiling for the entire 17-member family. It started with every family member taking a Meyers-Briggs–like personality assessment. Their profiles were then posted on a board at a meeting to which everyone was invited.
 
“It was interesting to see which types got on best with other types,” says Paul. It also helped the family articulate certain concepts, such as that some people wanted to be involved in the business and others did not; that only people who worked in the business would control the business; that there is a difference between business succession (who runs what) and estate planning (who gets what); and that everyone would be taken care of even if they weren’t in the business.
 
With everyone understanding where they stood on the family chess board, the hard part began: evaluating the children who worked at the business. “The first 360-degree session was painful,” says Stephen. “Some of the individual issues were hurtful and sensitive, such as how the next generation was perceived by their co-workers. It was disturbing for them because they didn’t realize that there were a lot of negative issues.”
 
5. Ensure genuine choices.
“It’s important that people not be pushed into a corner,” says Fast, either by parental expectations or their own dreams. “We try to help them move beyond their fantasies till they get to the point of establishing what’s really going to work.” For the O’Regan children, it meant creating personal goals they had to reach before a second 360-degree session was held, and an understanding that they had to put some personal ambitions on hold.
 
“The past seven years have been one long communication exercise,” says Fast. The children were still young, in their 20s, when the process began, and they needed to take time to sort out their own sense of self. “There has been a lot of maturing going on during the process,” says Fast, “and it’s ongoing.” Asked who will be the president of O’Regan Holdings when Paul and Stephen are gone, Fast says, “The last chapter hasn’t been written.”
 
6. Cede control.
“The O’Regans have done it as graciously as any business owners I have ever seen,” says Fast. Both have stepped away from the day-to-day operations of the individual dealerships, although they remain strategically involved in expansion plans such as the Toyota-Nissan-Hyundai dealership and used car emporium being built on the skeleton of the former Home Depot on Portland Street in Dartmouth.
 
Fast says that it’s particularly difficult for men to cede control, and both brothers admit they have no interest in just walking away, but they are trying to develop other outside interests. The two jointly co-chaired a recent capital campaign for the Ship’s Company Theatre in their hometown of Parrsboro, and last fall they took their wives on an African safari.
 
A beneficial by-product of planning for the future is that the company becomes better in the here and now. “It takes a lot of issues that are not really voiced and gets them out in the open,” says Stephen. The children now realize that they have to mature into leaders if they want to continue to be involved, and the hired managers have learned to work with them—a requirement that Paul says is vital. “If they don’t respect the next generation, you’re cooked.”
 
As a result, a lot of steam has been released from the HR pressure cooker, and Stephen points out that last summer O’Regan’s was ranked one of the Best Companies to WorkFor in Atlantic Canada, that it was the largest (with 550 employees), and that it was the only company in the automotive industry that made the list. The company was also recently named the 2007 winner of the Grant Thornton Nova Scotia Family Enterprise
of the Year from the Canadian Association of Family Enterprise.
 
Q & A
The second generation weighs in
 
How do you feel about the succession-planning process that you participated in?
Sean: I feel very good about it. I feel even better that it’s over.
Patrick: The process was helpful and necessary. Some parts were challenging, others were rewarding.
Tim: It was a seven-year-plus process for most of us, so it was deliberate and well executed.
Kathleen: Both family members and key employees were given a supportive confidential forum for authentic communication, which I think brought about a broader understanding of one another and the issues to be addressed.
 
What advice would you offer to those about to go through it?
Sean: Be totally honest about your goals and desires. Have a thick skin and a short memory. Don’t let others pick your partners for you. You have to decide if you really want to be in business with someone.
Kathleen: Get a professional facilitator to guide you through it. It can be tough at times, but you, your family, and your employees will reap the benefits.
Tim: Think hard about what you ultimately want for yourself. If you know that much, then the only thing left to do is devise a road map to get there.
Patrick: Keep an open mind. Thoughts about how things may look at the beginning may change before the process is done. That’s not a bad thing.
 
How has succession planning helped you both professionally
and personally?
Kathleen: Going through a rigorous training and feedback process such as this legitimizes successors in the eyes of both family and employees. Within the family, it has allowed us to maintain our closeness and the good feeling we have for each other, plus it provided an outlet to actually have some separation between what goes on at work and at home.
Tim: It helped me to understand and identify my own abilities and limitations.
I also benefited from a lot of leadership training.
Patrick: It has enabled us to have the right people in the right positions, it has ensured that we have maintained and even improved our communication and relationships as a family, and it has provided all of us with clarity for the future.
Sean: It has made me more aware of my strengths and weaknesses and has given me a framework for improvement.
 
How much will you use this succession-planning process if the next generation of the O’Regan family also becomes involved in the business?
Patrick: The oldest member of the next generation of O’Regans won’t start elementary school for another couple of years, so I think we’ll have lots of time to work on the process and perfect it.
Tim: I would recommend an identical process for the next generation, if they choose to be involved in the business.
Kathleen: Our family will definitely follow the same approach should future generations decide to become involved in the family business.
Sean: If the situation ever presents itself with the next generation, I won’t hesitate to engage the best experts available.
 

 

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