Continuation of the family and enterprise through effective ownership

Transcription

1 AN OWNERS MINDSET: BUILDING CAPACITY IN THE RISING GENERATION PRESENTED BY: WENDY SAGE-HAYWARD, MA, FEA DESIRED OUTCOME Continuation of the family and enterprise through effective ownership Enterprise Values, Vision and Purpose Direction and Goals Enterprise Strategy, Structure and Culture 1

2 WORKSHOP AGENDA 1. What do we mean by? 2. Defining an Owners Job 3. Why Development? 4. Developing Skillful WHY IS OWNERSHIP A HARD TOPIC? Mortality Money Power 2

3 Developing An Mindset in the Rising Generation FEX Symposium Presentation WHAT DO WE MEAN BY OWNERSHIP? Copyright Wendy Wendy Sage-Hayward Sage-Hayward Copyright Please Please do do not not reproduce reproduce without without permission permission OWNERSHIP OF WHAT? 3

4 Enterprise Financial Real Estate Philanthropic Heirloom Deferred Business 1 Wealth Business 2 Business 3 Business A variety of assets that need to be managed and shared Judi Cunningham NOT ALL OWNERS ARE CREATED EQUAL owner Active owner Types of Owners Governing owner Passive owner Investor owner 4

5 NOT ALL OWNERS HAVE THE SAME ROLE Lead Contribute Understand Accept Governing Active Investing Strategy Leads Contributes Understands Accepts Culture Leads Leads Contributes Understands Governance Leads Leads Contributes Contributes Relative Involvement Higher Lower Excerpts from: Business : How to be an Effective Shareholder, Aronoff, McClure & Ward, 2011 WHAT IS SO COMPLEX ABOUT FAMILY ENTERPRISE? 1 Overlapping Complex System (family, business, ownership) Different Stages of with Unique Challenges Dynamics Complex Corporate Structures Integrated Governance 6 Transitions 5

6 1. A FAMILY ENTERPRISE HAS COMPLEX, OVERLAPPING SYSTEMS FAMILY SYSTEM Members Employees Non- Employees BUSINESS SYSTEM OWNERSHIP SYSTEM Owners Owner Employees Non- Owner Employees Non- Owners OWNERSHIP is only part of the overall family enterprise mix 2. STAGE OF FAMILY ENTERPRISE AFFECTS COMPLEXITY Founding Controlling Owner Sibling Partnership Cousin Consortium Business Form 1 Business, 1 Location 1 Business, Several Locations Many Allied Businesses or Holding Companies Business Leadership Centralized Patriarch Sibling Team or One Member First Non Leader Board of Directors Minimal Addition of Trusted Advisors Objective outside experts Form Informal, Mom as CEO First Council Formal Structure Key Challenge Letting Go & Rising Gen Competence Sibling Rivalry, Lack of Leadership, Role Clarity Capital, Culture & Cousin Commitment, Branch loyalty, Diverse interests Sources: Amy Schuman and the members of the Business Consulting Group,

7 3. FAMILY DYNAMICS REQUIRE SKILLFUL NAVIGATION A variety of assets that need to be managed and shared Powerful Context identity, reputation, history Most Advisors are not trained in family dynamics Status Needs, Roles Enterprise Pressure of Transition (Stepping out & stepping up) Different personalities, styles, generations and preferences Others? Resistance to Change members wear Multiple Hats Disparate vision & goals Poor or Lack of Communication 5. COMPLEX GOVERNANCE STRUCTURES 1 Unified Group Branch A Branch B Branch C Branch D Branch E Branch F Branch G Representative Council for Issues 2 Qualified Board For Oversight of Business Company Professional Management Company Company Company 4 7

8 6. TRANSITIONS ARE CHALLENGING Lack of a common vision between interested parties Lack of a communication framework for all parties involved Difficulty of dealing with conflict, particularly around sensitive issues Unwillingness for all involved parties to support the succession Owners are ambivalent about planning for transition and/or reluctant successors Managing business profitably through change 60% = Breakdown of Communication and Trust Within 25% = Heirs Unprepared for Required Roles & Accountability 15% = All Other Causes Sources: 1) Williams & Preisser (2003). Preparing heirs: five steps to a successful transition of family wealth and values. 2) Grant Thornton, Private company succession planning: where do you stand? (2012) 5 CORE TOPICS FOR OWNERS 1. Growth: How fast and how large do you want the enterprise to grow? 2. Risk: What level of risk you are willing to take? 3. Profitability: What level of profitability is sought? 4. Liquidity: How will profits be used & can owners sell their stake if so, to whom? 5. Continuity: How do we maintain cohesion in our family and build an owners mindset in the rising generation so we can transition successfully? 8

9 OWNERSHIP BASICS 101 DEVELOP KNOW UNDERSTAND 1. Self knowledge 2. Strong communication skills 3. Effective conflict management skills 4. Decision making skills within a team context 5. Team and relationship development capabilities 1. How to develop an enterprise strategy 2. How to read a financial statement 3. Basics of the business & industry 4. s goals and how to evaluate the enterprise s progress toward these goals 5. Principles of family firm governance 1. How family values relate to or are reflected by the enterprise 2. Tradeoffs of business growth, liquidity/dividends and debt 3. Director and management challenges 4. Company culture and how to contribute 5. Policies that contribute to effective ownership DEVELOPMENT OF THE RISING GENERATION - FRAMEWORK SUCCESSOR ROLE Child growing up at home Youth and adolescence; learning and developing primary base of skills Young adult learning outside of the family enterprise; early stage of ownership in some cases Preparing for ownership and/or management: mentored within the family enterprise Successor: Designated as future owner; mentored by senior executive or board members Leader: Owner or Governing Owner; Active Owner Chairperson on Board or Active Owner AGE DEVELOPMENT GOALS Identity who am I? Building Self esteem; developing Resourcefulness and becoming Intimacy; strengthening Being productive; caring for Generative; self sufficiency; sharing wisdom; Individual Curiosity, Trust, initiative; testing limits and independent; experimentation competence; Affiliation with others; strengthening core self rediscovering self autonomy, boundaries others; finding purpose determination Learning discipline; Finding oneself separating Flexing boundaries for coping Basic social skills; from family; Learning to help with work, children and aging Trusting others and support others parents Differentiation of self; selfmanagement within the family context; setting healthy boundaries; conflict management Charitable giving; Early stage Developing purpose; Learning ownership terminology; tours and Responsibility and accountability; Values and relationship to money understanding of family enterprise purpose; Basic technical aspects of ownership (trusts, agreements, redemption and the like) Becoming interdependent forming partnership relationships; leaving behind sibling rivalries renegotiating family relationships; accepting new members into the system Understanding risk and risk appetite; relationship skills; Basic governance; setting ownership vision and values Renegotiation of partnerships; realignment of relationships; accepting exits from and entries into the system; Grand parenting Strategic thinking skills; Leadership skills; building Professional maturity; ownership structures for Governance skills and rising generation capability actively governing; setting goals and direction Dealing with death and disability; Receiving care from others; Mentoring ownership in the rising generations; Contributing to the community Business Positive attitude toward the business, basic education, and positive work habits Basic education, Organizational skills, Exploring career options Higher education, develop self confidence, and begin career exploration Functional expertise and planning, coaching, decision making and problem solving skills General management and profit center responsibility Executive development, strategy, personal growth, self awareness, and continuing education Chairman role, life planning: exploring other interests and opportunities Wendy Sage Hayward 2017 Adapted from: E. Erikson; S.T. Gladding; P. Piven and W. Mandel; J.L. Ward; C. Aronoff & J.L. Ward 9

10 BUILDING KNOWLEDGE, SKILLS, ABILITIES Create a Culture Define Expectations Talk about family values Attend family meetings Foster Learning Set Boundaries Develop Policies Tours Support Education Debate ideas Ask Questions Summer Jobs Facilitate conversation Develop Policies Workshops, Conferences, FE Events Foster relationship and network building Intrapreneurship Support and Encourage OTJ Training Attend ownership meetings Talk about the 3 hats Share Wisdom Job Shadowing Special projects Coach and Mentor Role Model Timeline PARTING THOUGHTS.. Recognize the Complexity but Don t Get Overwhelmed! Appreciate the Time it Takes to Understand the Realm Be Intentional About Development. It is easy to let time slip away. 10