Do we have an ownership strategy?

In our 2012 book Genesis of the Board, José María Navarro-Rubio and I explore the concurrence of three distinct spheres in family-controlled firms – ownership, business and management – which business owners must address in parallel.

First is the ownership strategy, which outlines the owners’ vision in terms of the type of company they aspire to create and its corporate purpose and values.

Second is the strategic business sphere, where all major decisions are taken to guide the company and ensure its long-term survival. As defined in the ownership strategy, this sphere may encompass both owners and non-owners, who contribute to the firm’s success by sharing their unique experiences and areas of expertise.

On the third level is the management process, where corporate leaders oversee the firm’s day-to-day operations and execute its overall strategy, previously approved by the board.

In this post, I would like to zero in on the ownership process, starting with my very first question: Do we have an ownership strategy? Or, on the contrary, are we passive owners, content with receiving positive returns from a few shareholdings?

The diverse wealth strategies of business families, articulated through their family offices, will be addressed in another post. In this post, our focus is on equity strategy and its impact on the firm’s core areas of operation.

For business owners, one way to think about their ownership strategy is through the lens of three central pillars: initiative, money and power dynamics.

1 – Initiative: Initiative is the core driver of the company. As owners, do we have enough initiative to drive the company forward? How do we contribute? Does the company have sufficient impetus to ensure its ongoing renewal, continuity and competitiveness?

2 – Money: As a family-owned firm, do we have a clear dividend policy satisfies family members while aligning with the company’s financial strategy? If our company can’t generate sufficient cash flow to hit our growth-rate targets, would we consider third-party funding? If so, what type of partners would we look for? Would we go public?

3 – Power dynamics: Business owners should pay utmost attention to the matter of power dynamics, the most common culprit behind corporate instability. Years ago, Prof. Juan Palacios described power on a continuum as strong power, vulnerable power, weak power, power vacuum and serious crisis. Without a doubt, establishing mechanisms to incorporate and enhance “strong power” is critical to long-term corporate survival.

The stability of power is at stake in family-owned firms during succession processes. Business owners must devote time, attention and resources to weigh this risk, which is extremely relevant from an ownership standpoint.

What will the power structure look like after transferring ownership to the next generation? Will the new system ensure the continuation of “strong power” and support business and managerial processes? Or will the resulting ecosystem make it more difficult for managers to do their jobs?

In my view, answering these questions – and taking the necessary decisions and actions they entail – are the first steps toward building a solid ownership strategy.




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