On this weeks episode I discuss ownership philosophy. Have you as an ownership group sat down and discussed why you own a business together and what ownership means to each of you?

My thoughts are that when a business is set up, ownership is a byproduct of the founders passion, but as the business becomes something to pass to the next generation different perceptions of what ownership might mean to each of you can tensions within the business and the family.

Having the conversation around what ownership means to each of you, whether that is before or after ownership transition has happened, can be a really positive step in creating the foundation for a multi-generational business.

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Hello, and welcome to this week's episode of

the family business podcast.

I hope you are doing well wherever you're listening to this in the world.

And now that I have rediscovered the record button on my computer, I'm

back into the flow of releasing these episodes on a more regular basis.

Um, if you haven't heard already, there was a season preview last

week, which covered the topics I'm going to be recording in this series.

And I have a number of exciting interviews lined up for the next series.

In today's episode, I wanted to talk to you about, um, ownership

and in particular, uh, what I refer to as an ownership,

philosophy or ownership structure.

the reason I wanted to talk to you about this is that a lot of the conversations

that I'm having with families kind of center around this as something that

hasn't necessarily been either documented or discussed in any great detail and

the suggestions that I'm making in terms of having those discussions.

Uh, bearing fruit.

So I thought I would share with you my sort of thought process

on this and why it is that I'm talking about it a lot in this.

Before we get into the detail of, um, ownership, philosophy,

or ownership strategy.

I think it's worth considering and bear with me on this, but worth

considering when it comes to ownership, what we're actually talking about.

For me, there are two types of ownership.

There is obviously the legal element of owning a business, uh, via shares.

Um, but there's also the emotional ownership that can come.

, Often in the absence of actually the, the legal ownership, you can

feel like you own something, even though legally it is not the case.

And I think that's something that is very often present within a family

business because of the nature of family business, the emotional attachment to

it is very high amongst those in the family who, who may not necessarily own.

The shares in a, in a legal sense.

And I think what this can do is create an expectation of what it's actually going

to feel like when the legal ownership then actually arrives at a future date.

, it can obviously be a really positive thing.

It helps to create longevity in the business that if there is a shared passion

for it throughout multiple generations of the business, But what I also think

it means is that the legal sense of ownership only really becomes, uh,

something tangible or something to discuss at the second generation, uh, level of

the business as, as it progresses from sort of founder to second generation.

And the reason I think that is it in terms of.

Y a business is established.

It's very often to follow a passion or to put food on the table to earn a living

or to grow something that is, something that, that the founding owners firmly

believe in really strongly believe in it.

My view is, and the large number of founders that I've spoken to

about this tend to agree is that the business wasn't created.

In order for the founder to have an ownership of something other

than the, the passion and drive that is to create the business.

Um, if you ask a founder what their business is, they're not

going to come back to you and go, well, it's a hundred shares.

That's what I own.

Um, they're going to tell you about what the business delivers and what it does

Ownership is a kind of byproduct of them following their passion.

It happens to be the most convenient way or the most logical way in order

to establish the businesses . Is to have it in a structure that contains

shares and ownership, but it's not the sole purpose of why the shares exists.

That's as I say, it's a, it's a coincidence.

It's a byproduct of them setting up a business to follow their passion.

, but when it then comes to pass it, Ownership on as a transition within

the business, all of a sudden, there's this legal element, the shares in the

business that are, something that has to be then dealt with and passed down.

And I think by not having a conversation about what the, um, shares represent, what

the ownership of those shares represent to those individuals it can result in

a lack of clarity amongst our ownership group as to what the business is for.

. And so by then having a conversation or

to agree as a family, what the ownership, philosophy or ownership strategy is for

those shares, it's then an opportunity for everybody to share their expectations

and their feelings on, uh, what the ownership of that business means to.

And that for me is where, uh, the discussion around ownership

philosophy comes into its own.

So with that in mind, what do we mean by ownership,

philosophy or ownership strategy?

Well, the first thing to clarify is that it relates to ownership So we're not

talking about the overall strategy for how you're going to increase market share, or

take your product to market that that set, uh, um, a management or board level as

to the general strategy for the business.

The ownership philosophy applies to ownership, and sometimes it can be,

um, sort of broken down into two areas, such as your vision, your

mission, the values that you want to have demonstrated within the business.

And perhaps to a certain extent what returns you want

to get from owning this asset.

And that can be, um, financial in terms of setting expectations of whether you

want to grow the overall value of it to sell it Southern future point, or

whether you want to create a recurring income through dividends Or whether

you want to build a business, that it becomes something that supports future

generations, um, has the ability to contribute in a philanthropic sense.

Um, regular listeners will know that I've managed to get better at pronouncing that

particular word, but it's a conversation between you as owners as to where the.

shared vision comes into play and where there might be differences

that the benefit comes in my view from those conversations.

It's the clarity that can be obtained by sitting down with,

um, siblings, with cousins, with.

It may be that the parents retain ownership or uncles and aunts, uh, retain

ownership of sitting down with whatever that ownership group is and going, what,

why is it that we own this business?

What do we want to achieve as a result of that as an ownership?

And then you can start having conversations about how best you go

about that and what roles you play.

Um, it may be that some will work within the business.

It may be that some won't, but might want to sit, um, on a forum of

some kind to be able to contribute.

To the business or the board level or, um, via some of the governance forums that

we've discussed historically, such as a family council and owner's council, but

it helps to get that clarity and manage the expectations of everybody that's

going to be within that ownership group.

So that then.

Parsis down into those, um, areas of the business that do need to make

the strategic decisions as to how to deliver against that ownership

Strategy.

So having clarity on your ownership, philosophy, your ownership strategy,

the reason you own the business, how however you want to term it, to help

it fit with your circumstances helps you to make ownership decisions.

So if we take an example Well, perhaps you're producing something that has

a negative impact on the environment.

And you decided as an ownership group, that the purpose of the

business is to contribute positively towards, uh, environmentally.

As part of, uh, an ESG strategy or a sustainability strategy, then you

can make decisions about what you do with the negative contribution through

that lens, through that framework, understanding that you have an agreement

between your ownership level, that that is something that you want to do.

So you may go, we want to address our environmental impact and

understand it better as an ownership.

And then you can set up a task force within the business

to allow you to do that.

. So you might be wondering

of having this conversation.

If it's not one that you've had historically, and you can, ask, somebody

like myself to come in and facilitate those discussions and share some ideas,

uh, from other families as to how they've approached it, or if you feel comfortable

in doing it yourself, sitting down and arranging, setting aside the time.

To be able to have this conversation, but to have it in a very open and honest

way with ideally as little judgment on the responses, um, as it is possible.

So within a regional.

But what you might find is that by understanding what

ownership means to each of you.

And that's what I think is a good starting point.

As a question to ask yourself is what does ownership of this business mean for me?

What are my ambitions?

Do I want this to become something that is an enabler

for me to follow my own passion?

In which case do I need to have a very active role as an owner within the.

Or do I want it to be fulfilling from a, an emotional perspective

because the work that's done within the business is something that I'm

very passionate about in which case you're more likely to want to be an

active participant in the business.

Whatever ownership means to you is personal to you.

And in the same way, as you would want that respected by your, Siblings or

parents or cousins, whatever, whatever level of conversation, you're having an

ownership level by putting everything in on that table and going, this is

what we're looking for out of it.

You're likely to then have an understanding of the different

motivations that might be at play within each of those owners.

Now that doesn't need to be seen as a negative, if all of you don't agree on.

That it's a starting point for you to agree with what, what can we do

in order to get a level of compromise between all of us that allows us to

progress forward with the business?

, it may be that you all agree with what the purpose of the business is, why your,

the most effective owners of that business and what roles and responsibilities

you want as an ownership team.

But as that, isn't always the case.

It might be necessary to have conversations around what

compromises might need to happen.

Now, I like to use analogies when I'm working with clients or when I'm, um,

explaining or running through things.

It is the way my brain learns.

So.

apologies if it's not your preferred method.

But the analogy I use here is if you see the opportunity that you have with your

businesses as a blank canvas, and what ownership means to you is your own version

of a picture that goes onto that canvas.

If there are say 10, 15, 20 of you all with different cards, Paint

brushes to paint your picture.

If you just go ahead and paint your idea of ownership or the vision

for that business onto the canvas, without any conversation, without

any cooperation or compromise, you're likely to just end up with a mess.

All the different colors will be mixed in.

There'll be no shape or, structure to the painting.

It'll be, uh, a brown mess on, uh, on the camera.

Whereas, if you take a step back and have that conversation around what

ownership means to you and what you want the business to do for each of

you, that's akin to saying, well, we're understanding that we bring different

things to this canvas and in order to paint the best possible picture,

we need to take a little bit of this color, a little bit of that color, a

little bit of structure and agreement.

And so by understanding what you're able to contribute, what you're willing to

and able to contribute to that picture.

You're far more likely to get to, a closer version of the vision.

Then if you just all throw your pain brushes in without any of

that conversation or structure.

Now, maybe that there's a branch of the family or an individual

that has a completely separate idea to what everybody else.

Is having, and it may also be that then the conversation needs to be had

around, well, if everyone else wants this, um, beautiful blue, seascape,

for example, as, as the vision and the, the, the person that has a different

viewpoint, it has an orange paintbrush.

It might be that little touches of that.

Orange will enhance the rest of the colors.

Whereas again, if you try to Chuck all of that orange into the

mix, it would mock up the pain.

So by having the conversation and understanding what it is, the ownership

means to everybody, you can then start to have the conversations as to, okay.

How do we create an environment that allows everybody to get as close to what

they want out of it whilst also having a profitable business at the end of it?

You can then decide what communication forums need to be in place in order

for people to feel a part of it.

If they're not within the business or to separate out your roles as owners

and board members and employees, if you happen to work in all of those

different areas, but you can then start to base that on something.

Is your ownership, philosophy, your strategy for why you

as a family owned this.

So, although I said earlier in the show that, um, ownership is kind of a

by-product of somebody following their passion, when they set up a business, if

the business has been successful and has, turned into something that can be passed

on to future generations, it's really important not to ignore the emotional

ownership that exists within that founder.

And so by asking the founder the same question, what does

ownership mean to you now?

You're likely to get a far different answer to when the

business was established.

Because as I say at that point, it was almost a by-product for

the passionate was being followed.

And so.

One of the other elements that you may uncover.

And it would be interesting to, to talk to the founders of the business

as well as, as, um, those that are perhaps taking on ownership is the

question is what ownership means to you.

Blocking any future transition of either ownership or management roles.

So it may be that for a founder ownership of the business means control.

It means power.

It means, uh, influence and status and their sort of place in the

world is defined in their view by the ownership of the business.

. And it may be that the thought of giving

a bit more conversation a bit more time.

Um, it's not just the legal element of that ownership that needs to

be discussed is very much more the emotional side and how some of those

elements of what ownership means.

Can they be replicated?

Can they be replicated in an alternative role or by pursuing alternative passions

in a way that retains the element of wellbeing that is derived from the

ownership of something, but allows the business to continue to progress

and function via the next generation.

It's beneficial to understand different people's perspectives on something like

ownership, particularly when it comes to a family business, because it's not

the same as when you own shares in a footsie or a Dow Jones listed company.

There can be some emotional attachment to that, but generally the metrics as to

why you own those, is is this going to allow me to achieve my financial goals

and what dividend yield am I going to.

And things like that, but when it comes to a family business and when it's your

own family business, that emotional tie to it creates far more complexity

than if it were a, a standard, shall we say, share on a stock exchange.

So to summarize, what I was hoping to get across on this episode is to share with

you a discussion that I've had with many families over the last two or three years

around why it is that they own a business together, what they want that to represent

collectively and for them individually.

And then how best do they create the forums around

which those can be satisfied?

And it is very likely that if what I'm talking about resonates with you, or isn't

a conversation that you've had with your own family, it may very well be that there

is the need for an element of compromise.

Now, for me, that is a positive step because it means that the

business can support the ambitions of more than just say a founder.

It can be something That helps create this multi-generational business that

can go on to support different members in different branches of the family,

over many, many generations, but it starts for me with a conversation

about what ownership means to you.

Now, if you want to get in touch and get a sample of a questionnaire

that I use to help with this, I'd be really happy to hear from you.

You can drop me an email.

It's Russ at family business, partnership.com, and I'll be happy

to share some of the methods on how to start this conversation.

. So, if you think that would be useful,

please do get in touch

, and I hope you found the episode useful.

As I said in the series preview, these are going to be

shorter, more succinct episodes.

And, uh, so with that, I will bid you farewell and hope you have a fantastic

day and fantastic rest of the week.

And join me on next week's show.