An owner’s job in a family business is to maximize opportunity and minimize risk for the family and the business.
This is a the most important role in family business and can be complicated when more than one generation has ownership of the business.
In order to do this well as an ownership group, it is important to understand your values. They set an expectation for how you make decisions as owners.
For some people, defining values can feel like a useless exercise or even too difficult to take on. It is worth doing.
The good news is your values are already here. You have been following them for years, sometimes generations. You simply need to discover and define them so you follow them with purpose.
This is how you discover and define your ownership values:
Schedule three hours with all of the owners
Ask each person in the room to spend five minutes writing the answers to three questions:
How was the business started?
What are the stories the founders tell over and over?
What key decisions were made to get the business started or keep it going?
Ask each person in the room to tell the stories that came to mind. Have fun doing this. This is often a chance to reminisce about good times, grandparents and aunts and uncles
Ask each person to write down the themes they heard in the stories
When everyone is done, put all of the words and phrases you heard on a whiteboard. You will notice themes and be able to group them together into 3-5 themes.
These are your values. Use them when making decisions about ownership issues such as who can be a future owner, how your ownership is structured, what kind of growth you expect from your business and how you make decisions.
Here is an example of how discovering and defining your values helps make important decisions that minimize risk and maximize opportunity for the family and business.
A first generation family business did this exercise and discovered the following values:
Be independent - work for yourself
Take calculated risks
Build something from nothing - solve problems
Create opportunities for others
Before doing this values exercise they wanted to gift the business to their three children. They thought each of their kids could share equal ownership of the family business.
After defining their values they saw that gifting the business did not align with their values. They also realized that since only one of their kids ran the business and the other two not only didn’t run it but didn’t work in it, it could easily fracture the family.
They saw clearly that the best decision for their family business was to sell it to one of their children, gift some of the proceeds to each child and create a fund that their children, grandchildren and future generations could borrow from to build their own businesses or create opportunities for others.
Their ownership decision sets the next generation up to work for themselves, take calculated risks, build something from nothing, work hard and create opportunities for others.
I challenge you to discover and define your values so you can maximize opportunity and minimize risk for your family and business.
Schedule 3 hours with the owners of your family business and discover and define your values.
Read this great article about values https://hbr.org/2002/07/make-your-values-mean-something . While it is focused on the values of a business, it gives some important guidelines for what to avoid when you identify your values.
Take a look at your estate plan, buy-sell agreement and other legal documents. Realign them with your values.