What family owners can do to sustain their business culture
The operating leaders of a family-owned business may not be best suited to drive the family’s values into corporate priorities. Our advice to ownership groups is to separate the roles of cultural stewardship and business stewardship. The best formula is bicameral: One governing body addresses the family’s values and preferences and distills those into a coherent set of shareholder priorities; and another body, a traditional board of directors, is charged with overseeing the strategy and operation of the company consistent with the shareholders’ guidelines.
Companies that don’t work their hardest to sustain clear cultural priorities do their shareholders -- and their competitive position -- a disservice. Owners should:
• Understand their company’s growth opportunities and related execution risks.
• Articulate and codify their approach to strategic boldness.
• Know how much business risk they are prepared to take -- e.g., geographic expansion, acquisitions and outsourcing key functions.
• Define success (intermediate and long-term) in measurable terms, both financial and non-financial -- spanning competitiveness, quality and other matters.
• Ensure an appropriate capital structure -- e.g., the right balance sheet, the right debt level and terms, and alignment of aspirations among equity owners.
• Make sure the balance sheet is appropriate both to owners’ values and to company opportunity.
• Communicate shareholder values and objectives clearly to those responsible for management of the business.