G2: Building the Next Generation

CHAPTER 13The Ownership and Governance Foundation for G2

The foundation of prosperity is poured out of stability and opportunity. In order to successfully develop future generations—G2 and beyond—a firm must be able to assure those professionals that if they commit their careers to the firm, the firm will reciprocate by never drastically changing and never ceasing to look for opportunities to grow. Before building their homes in the neighborhood, G2 professionals want to know that the site is not located on a floodplain and will never be rezoned for light industrial use.

Involving G2 professionals in the ownership and governance of the firm is a way to create that stability and ensure that sense of opportunity. Many founders struggle with the notion of relinquishing control and become annoyed when G2 professionals inquire about their succession plans. These frustrated founders misunderstand the question. Typically, G2 partners do not mean, “When are you going to retire and sell us your shares at a steeply discounted price?” Rather, they want to know: “If we commit our careers to this firm, can you promise us that we are not going to end up working for a bank or an insurance company because you could not figure out a way to create liquidity for your equity?”

The suggestions for corporate governance in this chapter apply to firms that want to prioritize the development of their next generation. If you want to grow a lawn in your backyard, there are certain things you need to do ...