Family Ties Online: The Different Types of Family Business Owners
Note from Sherman Titens: In this column, guest contributor Joe Paul takes a look at a variety of motivations and behavioral types displayed by family business leaders. He addresses how their differences can affect the continued success and harmony of a family business.
Frank was excited about the potential of acquiring a competitor. He had prepared a great presentation to share with his company’s board about this opportunity. The two independent board members had arrived early, but his sister Karen was already 45 minutes late, as usual. He was managing his frustration with her pretty well as she arrived, and he could finally call the board meeting to order.
During his presentation, he could see the troubled look on the face of Jane, his other sister. As he invited questions, Karen was checking emails, and Jane was scowling at the agenda she had in hand. When Frank asked for his sisters’ thoughts about the opportunity, Jane said, “All I know is that Dad would never have considered buying a competitor. He was a very wise businessman, and I don’t feel comfortable with doing something he never did.” Karen responded with a thumbs-up to Jane.
Frank kept his cool because he knew that he had the votes of the independent board members. But he was sick and tired of his sisters’ approach to being an owner and a member of the board. Their behavior was so consistent that he knew what they would say before they opened their mouth.
As we can see, there are a number of types in the board meeting. In our story, Frank was in the role of “the Investor” while Karen was “the Grudge” and Jane was “the Keeper of the Shrine.”
The following demonstrates how varied the motivations and types of family business owners can be.
1. Operating Owner: This owner manages the family’s business.
Day-to-day management issues and the requirements of the business are
paramount to him or her. There may be tensions between the operating owner and
passive owners who are more motivated by income from the business
than by reinvestment in the business.
2. Governing Owner: Board member but not employed in the business. His or her interest is shareholder return on investment, supporting senior management and holding them accountable for performance.
3. Interested Owner: Actively interested, attentive and supportive but not employed in the company or as a board member.
4. The Steward: One who has a multi-generational perspective. He or she believes his or her responsibility is to enrich the company’s assets and pass them on to the next generation. Long-term stability always trumps short-term return on investment. The purest example might be a trustee or a most trusted family adviser who has no personal ownership of equity but is dedicated to sustaining the legacy of the family.
5. Obedient Owner: Not particularly interested in the business. He or she votes as instructed by the parents or siblings who work in the business. He or she is often driven by the desire to create or maintain family harmony and often don’t really feel like an owner.
6. The Investor: Interested primarily in return on investment. The company is merely an asset that needs to be managed for profit. This owner has no emotional tie to the company.
7. The Grudge: Is an owner in name only. He or she doesn’t really feel empowered to act like an owner. He or she may frequently miss meetings and have to be reminded to sign documents, harbor ill will or have a grudge toward other family members, and may often express him or herself in a passive-aggressive manner.
8. Heritage Owner: This owner sees the company as a civic responsibility and feels a strong sense of responsibility to the community. The business is often seen as a memorial to the founder. This type of owner often resists change to the ways things have historically been done.
9. Trustee/Owner: Has a fiduciary duty to manage the trust for the best interests of the beneficiaries. He or she must comply with the language of the trust document and be vigilant concerning the demanding ethical and regulatory obligations.
11. The Chess Player: This owner’s attitude toward the company is based on some injustice in the past. This owner uses ownership as leverage in the ongoing drama of the family. This owner is comfortable being in overt conflict with other owners and appears to take pleasure in perpetuating a contentious relationship within the family.
12. Hostage Owner: One who feels burdened by ownership and would sell if he or she were free to do so. This owner may have values that are not compatible with the nature of the business.
13. The Captive Partner: Siblings or cousins who would never have picked one another as business partners but have been made so by an elder’s estate plan.
14. Entitled Owner: Has expectations of others that is out of balance with their actual contributions. For instance, this type of owner might expect to be paid much more than he or she should be just because he or she is a second-generation owner. They tend to have poor boundaries.
15. The Social Entrepreneur: This owner will say that he or she is in business in order to “do good” in the world, and the business is a tool to do this.
16. The Status Seeker: This kind of owner uses business ownership to facilitate access to things like membership in exclusive clubs, serving on boards, being appointed to advisory positions or seeking public office.
17. The Keeper of the Shrine: For this owner, the business is a living memorial to the founder. They may be too focused on keeping everything just as it was when the founder was in charge. This resistance to change can create significant risk to the business.
18. The Padrone: This type of owner is often the founder and is like a village elder in the way he or she thinks about ownership. This type of owner may have done many things to help the employees of the company out of a sense of indebtedness to them and is often concerned about whether the successor can sustain these relationships and cope with the emotional demands of this way of ownership.
19. The Obsessed Owner: This type of owner has little or no life outside of the business.They have typically neglected their relationships with their children and their children often feel that the business is more important to the obsessed owner than they are, and they are often right. Their only source of self-esteem is in the success of the business. These owners have great difficulty in letting go of control to their successors, and their goal is to “die in the saddle.”
If you are an owner in a family business, you need to be clear about what type of owner you are and what your real motivations are. Many of your values and behaviors will be predicated on the full understanding your type and your motivations. This is especially true if you are one of several partners. And, you could benefit from coming to know the type and motivations of the others.
You might consider a simple exercise. In a leadership meeting, present the above list to the group, co-owners and representatives. First, have each individual owner decide which one or two types best describe his or her leadership motivation and style. Then, have everyone write down the types of leaders they think the others are and share the conclusions with the group.
Remember, the owners each may be different types and have different motivations. If you know what motivates the others, you can collaborate with them more effectively. And with this kind of insight about yourself and others, you can predict ahead of time where decision-making processes may get derailed because of some fundamental differences in each owners’ type and motivations.
Seven things to remember:
1. Seek to understand your partner’s motivations before you try to satisfy your own.
2. Never assume that your partner’s motivations are just like yours.
3. Your assumptions about your partner’s motivations may not be accurate.
4. Don’t assume that your partner is necessarily fully aware of their own motivations.
5. Keep in mind that you may not be totally aware of all your own motivations.
6. Your partners (or you) may harbor conflicting motivations in your own mind about an issue.
7. If you have similar mixed types and motivations about an issue with another (i.e. you both feel like being a Steward and an Investor ) you will tend to take a side with one of your motivations, artificially polarize with one another and take a stronger position than you actually feel.