Observations
Ownership attitudes are grounded in a self-centred sense of: “here, now, and mine”. They encourage individuals to consider the family business as theirs to do with as they see fit, irrespective of whether they built or inherited it, in whole or in part. This attitude may be entirely rational and justifiable, but in pure form is largely incompatible with any intentions to be a multi-generational business family.
In contrast, Stewardship takes a longer term, less self-interested perspective. Stewards regard themselves as responsible for looking after the business for the eventual benefit of others (usually future generations, even those as yet unborn). They accept obligations to protect and nurture, so they can pass on something better and more valuable than whatever they themselves created and/or received, and operated. Stewardship attitudes are a key driver of family-oriented business succession and a core requirement for building a lasting family legacy.
Disagreement between family decision-makers over whether they should be Owners or Stewards of the family business is a common cause of conflict amongst business families. Plans, and planning horizons won’t align; financial expectations go head to head; family cliques form; executive recruitment and innovation investment become a battleground; succession plans don’t get off the ground, and everybody seems to be dancing to a different tune – both in the family and in the business.
Solution
The family needs to achieve a workable alignment between Owners and Stewards. To do this it should initiate a series of family meetings to consider deeply who and what it is; what it stands for, and what it wants to do in the future – as a collective – in response to declared individual and collective needs and interests.
The result should be a comprehensive, agreed Family Plan built on foundations of declared and revealed family, and key family members’: Values, Visions and Goals. The process should be inclusive, honest, constructive, educational, transparent, self-reflective, and aspirational. All key individuals should be encouraged to participate actively – this is a process that does not welcome passive involvement.
Part of the planning process will involve raising the issue of Ownership vs Stewardship. Based on Values, Visions and Goals, it should be obvious which camp individuals, and the family as a collective, are in.
Significant differences in needs and intentions will be flushed out quickly through this process. They should be acknowledged and tackled head on, using an interest-based negotiation approach, to develop “best possible” solutions that work for everyone, as well as they can. With a bit of imaginative problem-solving, rather than compromise (dreadful concept!), most families who get this far find they can develop solutions that work – even if they don’t look much like what was initially anticipated.
Individual family members who declare they want to be Owners may be satisfied by engineering a significant liquidity event, where they take substantial amounts of money out of the business, sufficient to satisfy their personal needs, while leaving enough behind for the core business to remain viable. This could mean selling off low-priority assets through a business rationalisation, or selling off higher value items that the business can manage without.
The funds received may be applied to personal use, or pooled with other family members to create an investment vehicle outside the main business. This can be an effective strategy for retiring generations as part of a succession process, where older family members’ fortunes no longer depend on the performance of a family business in which they now have limited, if any, control, or operational responsibility.
Once Owners get their required funds out of the business and under their control, their job is done, as Owners. They can exit, or re-engage as Stewards, to help manage whatever assets remain under collective control.
Stewards need to put structures and systems in place within the family to build and protect the family’s legacy. To the extent these plans depend on the future performance of the business, the family’s expectations for business performance (ie: return on equity (RoE) and distributions to the family out of the business), should be clearly stated in communications with the Business Board. It’s then for the business to work out how to achieve the family’s financial, and other goals (eg: environmentally responsible operations), while also achieving business goals and satisfying longer-term sustainability needs.