‘Family businesses are dysfunctional.’ ‘Non-managing owners are only in it for the money.’ ‘Shirtsleeves to shirtsleeves in three generations.’
For an owner contemplating business succession planning, the conventional wisdom sounds grim!
Certainly, no family business—or family, for that matter—is without conflict. Conflict is endemic when people with different perspectives—owners, directors, managers, family—have different needs, perspectives, and priorities.
So, how can the next generation of owners deal with conflict and become engaged in business decision making in a way that sustains and builds the capital that has been created?
Benefits of engaged owners
Owners who don’t work in the business can be an asset, not a liability. They bring a different, but critical, viewpoint. They often possess skills, talents, experience, and perspective that can help shape the vision and strategic direction of the business. They, of all participants in the family business system, are best situated to think beyond ‘What’s the best decision for the business?’ to ‘What’s the best decision for our family and our core capital?’ Core capital—the unique blend of financial, human, and enterprise capital that make up the assets of a business-owning family—includes the business itself but goes far beyond it, and includes the savvy in the family’s lineage and the entrepreneurial knowledge and drive developed over generations. For a business-owning family, there is so much more at stake than money. When owners think broadly about how all the forms of the family’s capital are invested inside and outside the business—not just the financial capital—they are more likely to deploy their capital wisely.
Engaged owners experience less conflict and bring important contributions to the business and the core capital. They have spent time together articulating a shared purpose—the answer to the question, “Why do we want to be owners of this business together, if at all?”—and laying out a common vision for the future. They have worked with board, management, and family to allocate responsibility for making decisions around critical issues such as capital investment, acquisitions and divestitures, dividends, strategic planning, corporate branding, and relocation, and have laid out policies to provide additional guidance. For family owners who undertake the work of engagement, there is a new energy around business and capital discussions. With engaged owners at the helm, board and management alike find they have a strategic partner and a far clearer vision for the future.
Engaged Ownership: A Guide for Owners of Family Businesses
Written by Withers Amelia Renkert-Thomas, ‘Engaged Ownership: A guide for owners of family businesses’ is written for family business owners and the advisors who help them and lays out a time-tested process for building engagement among all owners, managing and non-managing.
Engaged ownership also discusses the particular problems that can arise under three different ownership constellations:
- when managers and non-managers share ownership of the business
- when ownership includes a trust
- when the ownership group comes to include non-family members.
The process and challenges of achieving engaged ownership are illustrated throughout the book by the story of the Owen family, second- and third-generation owners of Owen Products, Ltd., a terracotta manufacturing company. The four Owen children—Mike, Martha, Amanda, and Christopher—find themselves as third-generation owners following the unexpected death of their father, Charlie. The Owens are entirely fictitious, but their story is pieced together from those of many family businesses, and it demonstrates how managing and non-managing owners can come together to make decisions about the future of the business and core capital.