Transgenerational wealth creation is the result of sustained and successful ownership advantage, fueled by a strong familial and entrepreneurial orientation. Yet these advantages need a strong engine, to energize their ongoing and sometimes strenuous adaptation. Its fuel is a mixture of familial and entrepreneurial orientation and reflection.
As many family businesses expand to include non-family executives, the onus is on the owners to set goals and guidelines in line with their vision and collaborate with these leaders to hit these targets.
To best serve your family business and its executives, you need to be the best owner you can be, which starts by developing a strong owner strategy. To do this, start
by asking: am I still the best owner for the business?
The first question here is: is the purpose of your family still fueling distinctive advantages that make you the best owner of all your business assets? While operational involvement in the family business declines, we see an increase of active-ownership roles among enterprising families together with the family offices.
‘Better’ owners within a family provide their growing team of non-family executives with a clear set of KPIs and guidelines as to what long-term success looks like for them. Collaboration between owners and leaders is the new normal and will become more established as a new modus-operandi.
The following process for your owner strategy can help your enterprising family continue to be the best owner, or steward, of its business legacy from generation to generation.
Changing the entrepreneurial mindset
Most strong family entrepreneurs or entrepreneurial couples with 30+years of leadership experience often view their owner responsibilities as a time consuming, demanding or uninteresting task. In their time, approval by the board happened by looking at yourself in the mirror and asking yourself as the majority owner “do we commit, or not?” Quality of decision was everything, transparency negligible, and formality vicious.
The change in the predominant succession paradigm into outside management will
soon become the norm of our so-called new normal, especially for these larger “hidden champions”. This new normal leaves the matter of the business’s competitive advantage to outsiders, but demands active, competent and engaged owners to set the goals. Making this shift in mindset and capabilities of the enterprising family is key to making succession an opportunity – to take your transgenerational entrepreneurial potential to the next level. Active ownership beyond the core business also creates opportunities to get the growing number of next-generation members entrepreneurially involved, take leadership responsibilities, and generally be more active.
Familial and entrepreneurial orientation build the foundation and constitute the core competencies to building transgenerational ownership advantages (such as social capital, governance, financial capital, and talent).
Changing the entrepreneurial mindset
Practice 1: Know thyself
Self-reflection is an essential skill for better owners and is often a critical bottleneck. With too little self-awareness it is hard to define the role of the non-family executive leadership team. Under the ‘new normal’ conditions, better ownership means encouraging more ongoing learning among the most senior leaders and executives.
Practice 2: No transpiration without inspiration
Regardless of the preferences, having a routine for transgenerational dialogue in place that works like a Swiss watch is key. Jointly reflecting about how entrepreneurial norms, beliefs and principles are being fundamentally challenged by modern paradigms – that’s what sets true next-generation qualification apart.
Practice 3: All options on the table
‘Better’ owners have a recurring discussion about exit options of increasing or decreasing relevance for their wealth creation in the long- and short run. “Hidden champions” routinely have well-structured evaluations together to discuss
their future parameters to measure successful wealth-creation in their understanding. Strategic excellence and smart governance, including reporting and compliance, are necessary core competencies to successfully implement any buy-and-build strategy.
Practice 4: Activating your owner strategy
Activating a strategy from a better owner role also involves the ownership assembly and the board of directors. Especially in interactions with the board and the senior executives, the enterprising family must lead by example. In the new normal, owners have raised their game in selecting, assessing, negotiating and onboarding new talent, both from within the enterprising family and from outside. To bolster confidence and perseverance for the new normal, better owners make it one of their highest priorities
to reward individuals and teams visibly for accomplishments.
