Ownership…it’s a bit of a contradiction. On the one hand, we humans seem to get the concept as soon as a toddler can say, “Mine!” On the other hand, ownership as a distinct business role is often unnoticed in family businesses…particularly when managers and owners are the same people.
In fact, owner decisions are few and far between. Here’s what owners actually decide:
- Set the “playing field” for the business by defining the purpose, values, vision and some specific financial goals – levels of growth, risk, profit and liquidity;
- Communicate that guidance, with one voice, to the board and managers;
- Review and support the strategy proposed by management, especially ensuring it can meet owners’ vision and goals;
- Decide whether to keep, merge or sell the business; and
- Elect directors, when they have a board. In the absence of a board, the owners also serve as directors. (And that job description is another topic for a different day.)
These decisions certainly happen when owner and manager roles overlap – they just get a little obscured by the frequency and urgency of day-to-day management decisions. For example, an owner-manager who finds out that a contiguous 120-acre parcel is about to come up for sale probably thinks through both manager and owner considerations.
Manager concerns focus on day-to-day considerations like time, cash and efficiencies. Owner questions are almost always complex and challenging. It can be easier to focus on management decisions – they have more concrete answers. Owner choices have deeper, broader and longer-term implications. Tackling these important, strategic questions is hard enough to find time for if you’re the only owner. And, for a group of owners, aligning on these very important, long-term choices is often very challenging. This becomes harder when owner teams don’t carve out dedicated time to learn and discuss each other’s goals.
Aligning owners on vision, values, financial goals (this IS an investment of your money, after all!) and then communicating with one voice to managers and the rest of your family takes time, energy and deliberate work. It’s not for the faint of heart – talking through things like how fast the business will grow or how much risk it will take can reveal deep differences in individual needs and preferences.
One of the most frequent events that can drive the need for a dedicated owner meeting is management transition. When a senior generation backs away from his day-to-day role and still owns a big part of the company, his needs and preferences are very likely different from those of his 35-year-old daughter and her cousins. He wants to minimize risk. They want to expand. He wants to stick with tried-and-true approaches. They want to innovate. You’ve seen this scenario before! (And note – sometimes the preferences are swapped. The point is, individual style or changes in life situation often cause owner goals to evolve.)
So, do you have owner meetings? They have particular application when the senior generation folks leave management. But it’s a great idea to begin practicing the owner role – and associated discussions and decisions – before members of your owner team leave management.
Owner meetings should happen less frequently than management meetings – twice a year or quarterly. If possible, they should happen off site. Below is an example standing agenda for an Owner Meeting. The content usually causes an owner agenda to look like a hybrid between a board meeting and a strategy meeting. When all the owners and all the managers are the same people, management updates can seem a little redundant. Of course, adjust as necessary, using the owner decisions outlined above as guidance.
EXAMPLE Owner Meeting Standing Agenda
- Around the Table – How is everyone doing?
- Management Update – State of the industry & Operating outlook for 2022
- Current Financial Goals – dashboard review & discussion
- Update Financial Goals – are they consistent with our long-term plan?
- Review Updated Decisions & Next Steps from prior meeting
- Set timing & topics for next meeting
The importance of the owner’s role is akin to the rudder on a ship: it provides an enterprise with overall direction, setting its fundamental purpose and financial goals. Consider taking time to set your rudder. It will probably take time and practice to get skilled at your owner role. And, it can be some of the most rewarding work you will do in your family business!
To view the article in the online 2022 Summer Partners Magazine, click here.
