Column Sign Up Cart

Aspen current thinking column

Archives

rule
Spring 2013

October Current Thinking Column

Wednesday, October 23, 2013

In this month’s column, Joe Paul takes a look at the different types of family business owners and how understanding the different sources of motivation that drive owners can impact the continued success and harmony of a family business.

TYPES OF FAMILY BUSINESS OWNERS

Frank was excited about the upside potential of acquiring one of their competitors. He had prepared a great presentation to share with his fellow board members about this opportunity. The two independent board members had arrived early but his sister Karen was, as usual, 45 minutes late already. He was managing his anger with her pretty well as she arrived and he could finally call the board meeting to order.

During his presentation he could see the troubled look on the face of Jane, his other sister.
As he invited questions, Karen was checking e-mails and Jane was scowling at the agenda she had in hand. When Frank asked for his sisters’ thoughts about the opportunity Jane said, “All I know is that Dad would never have considered buying a competitor. He was a very wise business man and I don’t feel comfortable with doing something he never did.” Karen responded with a thumbs-up to Jane.

Frank kept his cool because he knew that he had the votes of the independent board members. But he was sick and tired of his sisters’ approach to being an owner and a member of the board. Their behavior was so consistent that he knew what they would say before they opened their mouth.


As we can see in this story, there are a number of ways to be in the role of a family business owner. In our story, Frank was in the role of “the Investor” while Karen was “the Grudge” and Jane was “the Keeper of the Shrine.”

The following list demonstrates how different the experience and motivations of family business ownership can be.


1. Operating Owner

This owner manages the family’s business. Day-to-day management issues and the requirements of the business are paramount to him or her. There may be tensions between this owner and passive owners who are more motivated by income from the business than by reinvestment in the business.


2. Governing Owner

Board member but not employed in the business. His or her interest is shareholder return on investment, supporting senior management and holding them accountable for performance.


3. Interested Owner

Actively interested, attentive and supportive but not employed in the company or as a board member.


4. The Steward

One who has a multi-generational perspective. He or she believes his or her responsibility is to enrich the most beloved assets and pass them on to the next generation. Long-term stability always trumps short-term return on investment. The purest example might be a trustee or a most trusted family advisor who has no personal ownership of equity but is dedicated to sustaining the legacy of the family.


5. Obedient Owner

Not particularly interested in the business. He or she votes as instructed by the parents or siblings who work in the business. He or she is often driven by the desire to create or maintain family harmony and often don’t really feel like an owner.


6. The Investor

Interested primarily in return on investment. The company is merely an asset that needs to be managed for profit. This owner has no emotional tie to the company.


7. The Grudge

Is an owner in name only. He or she doesn’t really feel empowered to act like an owner. He or she may frequently miss meetings and have to be reminded to sign documents, harbor ill will or have a grudge toward other family members, and may often express him or herself in a passive-aggressive manner.


8. Heritage Owner

This owner sees the company is a civic responsibility and feels a strong sense of responsibility to the community. The business is often seen as a memorial to the founder. This type of owner often resists change in the ways things are done.


9. Trustee/Owner

Has a fiduciary duty to manage the trust for the best interests of the beneficiaries. He or she must comply with the language of the trust document and be vigilant concerning the demanding ethical obligations.


11. The Chess Player

This owner’s attitude toward the company based on some injustice in the past. This owner uses ownership as leverage in the ongoing drama of the family. This owner is comfortable being in overt conflict with other owners and appears to take pleasure in being in contentious relationship within the family.


12. Hostage Owner

One who feels burdened by ownership and would sell if he or she were free to do so. This owner may have values that are not compatible with the nature of his or her business.


13. The Captive Partner

Siblings or cousins who would never have picked one another as business partners but have been made so by an elder’s estate plan.


14. Entitled Owner

Has expectations of others that is out of balance with their actual contributions. For instance, this type of owner might expect to be paid much more than they should be just because they are a second generation owner. They tend to have poor boundaries.


15. The Social Entrepreneur

This owner will say that he or she is in business in order to do good in the world and the business is a tool to do this.


16. The Status Seeker

This kind of owner uses business ownership to facilitate access to things like membership in exclusive clubs, serving on boards, being appointed to advisory positions or seeking public office.


17. The Keeper of the Shrine

For this owner, the business is a living memorial to the founder. They may be too attached to keeping everything just as it was when the founder was in charge. This resistance to change can create significant risk to the business.


18. The Padrone

This type of owner is often the founder and is like a village elder in the way he or she thinks about ownership. This type of owner may have done many things to help the employees of the company out of a sense of indebtedness to them and is often concerned about whether the successor can sustain these relationships and cope with the emotional demands of this way of ownership.


If you are an owner in a family business, you need to be clear about what type of owner you are. Many of your values and behaviors will be predicated on your type. This is especially true if you one of several partners.

You might consider an ownership exercise. In a shareholders meeting, present the following list to your co-owners. First, have each individual owner decide which one or two types best describes his or her way of ownership. Then, have everyone write down the types of owners they think their partners are and share the conclusions with the group.

Any group of owners may have differing motivations. If you know what motivates your partner(s), you can collaborate with them more effectively. And with this kind of insight about yourself and others, you can predict ahead of time where decision-making processes may get derailed because of some fundamental differences in each owners’ motivations.


Take-aways:

  • Seek to understand your partner’s motivations before you try to satisfy your own.
  • Never assume that your partner’s motivations are just like yours. 
  • Your assumptions about your partner’s motivations may not be accurate.
  • Don’t assume that your partner is necessarily fully aware of his or her own motivations. 
  • Keep in mind that you may not be totally aware of all your own motivations.
  • Your partner (or you) may harbor conflicting motivations in your own mind about an issue. 
  • If you both have similar mixed motivations about an issue (i.e. you both feel like being a Steward and an Investor), you will tend to take a side with one of your motivations and artificially polarize with one another and take a stronger position than you actually feel.

rule
 



Design by Brand Navigation