Just what is good governance for a family business?

Lori Bacon remembers all too well being stumped by a question that probably shouldn’t have vexed the leader of Canada’s largest retailer of swimwear.

Yet there she was speaking at a conference for the Alberta Business Family Institute.

“The question of governance came up,” says the president of Swimco, a firm her mother Corinne Forseth founded in the basement of their family home more than 40 years ago.

At the time, she recalls her brother, Steven Forseth, and her husband, Dave Bacon, — essentially the rest of the company’s leadership team — looking at each other with curious expressions.

“We eventually said, ‘We don’t even know what that means.’”

The anecdote describes a knowledge gap for many family-owned businesses. Governance is essentially the process of professionalizing a family-run enterprise with a board of directors. Although it is a key piece of a succession plan to help ensure a business’s long-term survival, many owners are unfamiliar with the concept.

That’s why it’s a key theme at the third-annual Business Transitions Forum Oct. 10 and 11 at The Westin Calgary.

“One of the biggest challenges for family-run businesses is to develop a leadership structure so they have what is needed to move beyond a specific individual or group of leaders,” says David Tyldesley, vice-president and co-founder of Cube Business Media, which runs the event.

Indeed, statistics show many family businesses are falling short in this respect. According to the U.S.-based Family Business Alliance, about 30 per cent of family businesses survive into the second generation of leadership. That number falls to about 12 per cent by the third generation, and it plummets to less than three per cent by the fourth.

While the Business Transitions Forum includes several seminars about many aspects of succession planning, its marquee event will be a discussion panel on professionalizing the familyowned business.

The discussion will feature Sheila Witwicky with National Growth Partners and Swimco’s Lori Bacon and her son Brett Bacon, who handles operations and culture at Swimco.

While the company grew successfully, that question three years ago about governance spurred change.

Swimco sought out a transitions expert, Cindy Radu, a partner at BDO Canada.

“One of the interesting early conversations we had was around how to populate the board,” says Radu, who will moderate the Business Transitions Forum discussion next month.

Creating a board of directors is often critical to successful transitioning, says Radu, because it creates a framework to find, develop and guide new leadership once existing executives step away from running the business on a daily basis.

Also critical is a family council, which helps formalize discussions often among the owners’ adult children.

The company, which now has both a board of directors that includes three outside executives and a family council, is now prepared for transitions down the road.

To register by the Sept. 12 early bird deadline, visit businesstransitionsforum. com/Calgary.