Helping Family Businesses
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Monitoring the Best Possible Owners

The fundamental decision of any family business is the pledge by the family to continuity of responsible control. One family we know put it simply: "We must prove to others that we are `the best owners' of this enterprise. Otherwise we are not being fair to our employees and our society. But if we are `the best owners' then we know we are not only being fair to others, but we know we have an important competitive advantage."

"Effective ownership," they went on, "is the special competitive advantage of a family controlled business."

Their sense of ethics and devotion to this proposition caused them to seek to be accountable for it to their independent directors on their board. They asked their board how they could evaluate if the family were `the best owners' and what information and involvement the directors needed to do so.

The directors began by asking the family to develop a Job Description for Ownership and prodded them to be as specific and operational as possible. For example, one element of the job description was to interact at least bi-weekly with the senior managers to assure an easy, comfortable dialogue and to be up-to-date on the managers' activities and challenges.

Then the board met with the owners once per year to review the Job Description and once per year to provide feedback to the owners on their assessment of "ownership performance." Eventually they sent a survey to the senior management team asking them for their insights on the owners' conscientiousness to their function.

In addition, once per year the board held a discussion reviewing who else might be an effective owner of the business, which competitors, for example, might be able to substantially grow the business and provide excellent jobs for the employees. Then they challenged ownership to be persuasive on how the business is achieving distinct competitive advantage because of the owners' values, involvement, and contributions.

This is a family that believed in stewardship -- that ownership is a responsibility owed to others. Their sense of justice did not permit them to take their ownership for granted. They asked their board to hold them accountable to their ethic. The board created a nice system that others may want to consider.




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