In a previous post, I defined invited accountability in the context of operating and non-operating shareholders. Another opportunity for family members to invite accountability is in the situation where a founder passes control to a lead successor with voting stock.
There is a middle son of a family business founder that has been named the successor to his father, and there are six other siblings. The father feels the middle son is the best successor choice because he is an engineer and it is an engineering firm, he has the proper education, and has worked hard to be qualified. The father, not wanting his other children to weaken business leadership also gives this son the voting stock…control is in his hands as the single most powerful shareholder. The other siblings, being siblings, are resentful. Getting no explanation from the father, they snipe, criticize, form coalitions and try to catch their brother making mistakes so that they can prove that he is not better than they, as their father has apparently decided.
Now, this lead sibling can decide to say, it doesn’t matter, I have the voting stock and can do what I want, even if there is an outside board and family council.
However, this lead sibling can also decide to invite accountability, even though there is nothing to force him to do so. He can say to his brothers and sisters, I will share my thinking with you about the direction of the business and the hard choices we must make to change and adjust the business to market forces. And, we will have a discussion and open debate about my thinking in our family council and in our board room where I will listen and be influenced by you. I will do my best to try to convince you of the merits of my thinking, prepare you with information and when relevant, offer my decisions and rationale up for your scrutiny. In the end, I will not offer up my voting stock to you, but I will act as closely as possible as if we all shared the voting stock equally.
The other siblings may also choose to invite accountability. In exchange for their brother’s promise, they may offer their own. They may say, we will behave in ways that are respectful to you and not go behind your back to form coalitions, snipe at you, or criticize you to others or among ourselves. We will not be resentful or angry at the father for his choice of you as the successor. We will promise these things to each other and we will invite you and each other to challenge any one of us that violates these promises. In other words, we will invite accountability.
Of course their reasoning for doing so is to secure a stronger family, an aligned team of shareholders, and the resultant competitive advantage.