CHAPTER 8Owners' Mindset: Stewardship and the Board of Directors

A family business is founded by a visionary who is also its chief executive. An owner/manager is lord of the mansion, answerable to nobody. Since both roles rest in one person, the challenge of aligning stakeholders is nonexistent. The founder therefore finds it hard to imagine the challenges facing future generations, where many people share or compete for these roles. When the family struggles to delegate roles and overcome differences, the founder offers little guidance.

Subsequent generations often continue to view ownership as connected with operations. However, as a third generation comes of age, and the legacy business is harvested, generative family members discover that ownership is quite different from operations. As owners, family members are now once removed from being hands-on. They must learn to delegate and trust others. Owners make decisions about the fate of the business, balance the use of resources, and recruit and oversee the work of nonfamily executives and advisors. They have to make major decisions together about who will lead the business, what direction it will take, and how it will use its resources. They also have to decide how to use their wealth: How much should be reinvested, used for the benefit of the family, or employed for other purposes like philanthropy? As owners, their focus shifts from operating a business to overseeing family and nonfamily leaders and making choices about ...

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