Tag Archives: Ward

Siblings to Cousins: Ownership Goals for Growth, Risk, Profitability and Liquidity

Amy Schuman
Amy Schuman

In the transition from siblings to cousins, families are often called to define the ownership role for the very first time. In earlier stages, a relatively small family allows for more direct involvement of family owners in business operations and tends to put issues of ownership on the back burner.

It is at the cousin stage when ownership goes – frequently for the first time – to a significant number of family members with no direct involvement with the business. It is common for cousin owners to have minimal natural contact points with the business they now own. The majority of cousin owners do not have careers in the business, and some likely live a great distance from business operations.   There is much to understand about the ownership role  – and some excellent resources exist for further reading (see below). In this post, I’d like to focus on the opportunities contained within an ownership goal setting process.

Owners need to know enough about their assets to be able to set educated goals for their performance. What level of return is reasonable to expect? How much risk would be needed to achieve different levels of return, and what is our risk tolerance as an ownership group? What is a realistic expectation for growth of our enterprise at this point in time? What returns should we expect in terms of asset appreciation and liquidity?

A few of my clients have dubbed this goal-setting process “GRPL”, based on John Ward’s suggested four ownership goals of Growth, Risk, Profitability and Liquidity (see article referenced below).

Realistic family ownership goals will vary widely according to factors such as industry of business – age of business – location of business – and many others. But grappling with the GRPL goals allows a large, potentially dispersed ownership group to have a focus for their learning and involvement in their business as owners. In fact, ownership education can provide a clear mandate for the Family Council, which tends to coordinate shareholder education.  Ensuring the ownership group develops the knowledge they need to articulate clear and achievable ownership goals is an investment in the ownership, management, and family circles of the family business system.

In my experience, Boards of Directors welcome the ownership goal setting process with enthusiasm. Written and agreed-upon goals from owners makes the Board’s task easier, especially as independent directors join the effort. They know owners’ expectations, and can conduct themselves in the boardroom accordingly.

Some management teams may initially have reservations about the owners setting these goals.  As the management team is so intimately involved in every aspect of the business, they may question ownership’s ability to set realistic, informed goals for asset performance. However, if management has a role in educating owners about their industry and the company’s competitive position in the market, they usually becomes enthusiastic supporters of the process. Instead of having to worry or wonder if their decisions and actions are aligned with ownership’s expectations, management can now more easily evaluation their actions against stated ownership objectives. I’ve had CEO’s tell me that they sleep better at night, knowing more clearly the owners’ shared goals for the enterprise they have been entrusted to lead.

There is much more to explore in this regard. Hopefully this post has whetted your appetite to learn more. Please feel free to share your questions or experiences with ownership goal setting here, and to explore the resources below.

“What do Owners Do?”, John L. Ward, Families in Business Magazine, June/July, 2003

Family Business Ownership: How to Be an Effective Shareholder, January, 2011,  John L. Ward, Craig E. Aronoff, Stephen L. McClure, Palgrave/MacMillan

“Why Family Business Owners need a Job Description”, Jennifer Pendergast, Family Business Advisor, June 2010


Questions Students Ask Most

by John L. Ward

For the past few years we’ve kept track of the questions most often asked by MBA students who come from business-owning families. Would you suggest any other pivotal questions?

  1. Should I join my parents’ business? Culturally, do I have a choice?
  2. When should I join the family’s business – especially if it’s a large business or large family?
  3. Can the family business fit my dreams? Can I bring my personal passions to the business?
  4. Will I be encouraged to grow the business or struggle with resistance to change?
  5. What will it be like to work with siblings? Can we have a sibling partnership based on meritocracy?
  6. How can I best engage my family in sensitive continuity planning topics?
  7. What wise tips are there for developing a business together with my spouse?
  8. What business school courses are the best to prepare me for working with my business-owning family?

Case Study: Heineken as a Family Business

by John L. Ward

I had occasion to hear a talk by the Chairman/CEO of Heineken, Jean-Francois van Boxmeer.  So much of what he said reaffirmed our observations and experiences. First, some context, then our shared views.

  • Heineken is about 150 years old and controlled by the fifth generation of the Heineken family. They are the third largest beer company in the world.
  • The family has often relied upon non-family management, but always participated actively as owners. Mr. van Boxmeer started with Heineken immediately out of school. He held positions in Africa, Poland and Italy and proudly announced he had never looked for a job elsewhere. He’s been CEO/Chair since 2005 – 8 years already.
  • The Heineken family has voting control but only 25% of the economic interest via a holding company owned 51% by the family that controls 51% of an operating company. The rest of the shares are publicly listed.
  • The company’s core brand represents 17% of revenues. Otherwise they have more than 250 local brands around the world, 28 of which are long-term partnerships that represent 25% of all sales.


  • Mr. van Boxmeer was asked of the advantages and disadvantages of being a family business. The disadvantage he quickly noted was the “constraints of the balance sheet – especially in an industry where you must grow or die.” On the other hand, numerous advantages:

―   Patience and the long-term view.
―   The “nerve” to courageously hang in during tough times.
―   A special spirit of passion for the business.
―   The people like working for a family.
―   The long nurtured capability to work with partners and to integrate   acquisitions into the Heineken culture.
―   Long-term value is more important than share price.
―   Market share is more important than earnings.

  • What does it take to successfully integrate acquisitions?

―   Clear direction
―   Mix people up
―   Get rid of the 10% who don’t buy in
―   Use people’s strengths

  • What about the culture?

Culture is what you do, not what you say in a brochure. The key Heineken values are

―   Passion for quality*
―   Enjoyment*
―   Respect*
―   Integrity*
―   Entrepreneurship
―   Demanding of results

The first four (*) we note are commonly distinct for family firms. It’s interesting to note the seeming contradiction of “enjoyment” and “demanding of results.” Maybe not a contradiction?

  • What he looks for for cultural fit in new hires?

―   Integrity – doing what’s best for company (what we often describe as “doing the right thing”).
―   Competence, of course.
―   Empathy.
―   Low ego – the credit belongs to customers and employees.

  • A classic cultural contradiction he noted was to balance local culture and company culture. This, he feels, is another special capability of Heineken.

In sum, the long-term view, strong DNA-based culture and special dynamic capabilities define Heineken, even as a listed company and even though the family only holds governing roles.


Family Business Innovation: Doing Less; Doing it Better

by John Ward

A recent academic article[1] explored what’s known about innovation in family firms. My conclusion is: Family firms do it less and do it better.  (The article focused on technological innovation – not ownership or leadership or management innovation where one might find the more special family business particularities.)

Family firms innovate for diversification and long-term security.  They do less R&D and less globalization.  They do less because of an aversion to risk, because there may be family-owner conflicts of investments in innovation, and because they see fewer outside opportunities due to their more internal perspective.

On the other hand, family firms do what they do better and more successfully.  Family ownership provides stronger and more long-term oriented project leadership and more solid commitment of resources. There is also a more long-term patience for the benefits of innovation. And, because of inherent frugality, there is more productivity from innovation initiatives. Further, family firms assess innovation opportunities faster and with the perspective of the greater good — altruism – rather than local selfishness.

One particular capability of family firms is their managerial “ambidexterity.” All these advantages are stronger if ownership is more concentrated.

Much more research is called for in other forms of innovation – such as administrative and ownership innovation.

[1] “Research on Technological Innovation in Family Firms: Present Debates and Future Directions”, Alfredo De Massis, Federico Frattini and Ulrich Lichtenthaler, Family Business Reivew, March 2013


The Ford Family as Owners

by John L. Ward

Friend and colleague Amy Schuman urged me to read American Icon: Alan Mulally and the Fight to Save Ford Motor Company (by Bryce Hoffman, 2012). It’s a compelling and captivating story of a dramatic turnaround. It’s also a great family business story.

The family business topic I want to focus on is the role of the Ford family as owners and governors. There are 13 fourth generation cousins with 30 members of the next generation ascending.

  • For the longest time the G4 cousins have met quarterly – mixing a social and business briefing agenda. They never voted; they always worked for consensus.
  • For decades they believed that their role as owners was to provide unity, stability and long-term commitment.
  • Where there was conflict it was not from company issues but from old resentments over perceived fairness in family matters.
  • In their meetings, as controlling owners, they discussed
    • Confidence in the CEO;
    • Contingency plans if the CEO or strategy didn’t work out;
    • Significant debt decisions;
    • Dividend policy;
    • Maintaining control of the company.
  • Bill Jr., as executive chairman, took on several roles:
    • Emphasizing company innovation
    • Fighting off cultural complacency
    • Providing institutional memory
    • Identifying CEO candidates with the board
    • Managing family owners relations
  • Other family members
    • Served as cultural ambassadors with dealers;
    • Visited locations;
    • Participated in local philanthropy.

Family business owners will find even more value in the book. Founder Henry I was a classic example of “founderitis.” He also had a magnificent vision and social purpose. His son, Edsel II, was overwhelmed by his father’s inability to let go. Subsequent generations had to work hard to earn credibility and fight off perceptions as “rich dilettantes.” Bill Jr., now chairman, received invaluable, trusted coaching from independent directors who themselves understood family business – especially Hocksday of Hallmark.

Then there’s the bulk of the fantastic book telling of Mulally’s turnaround strategy and his philosophy of management.

Enjoy. I’m quite sure you’ll embrace the stories.  Thanks, Amy.


Knowing Your History is (Psychologically) Valuable!

by John L. Ward

Emory University research professor Marshall Duke and colleagues show the value of children knowing the family history. The benefits?

  • Better functioning family;
  • More resilient children;
  • Higher self-esteem of children, and
  • More self-confidence and self-competence for them.

This happens, they argue, because knowing your family’s history provides:

  • Meaning beyond the self, which brings feelings of strength and stability (intergenerational self);
  • Stronger belief that one is able to influence one’s destiny (locus of control);
  • A security from a longer perspective on time (anchoring).

They recommend:

  • Tell family stories over dinner…
  • …especially stories about the parents before the children were born, and
  • Relate where grandparents came from and what their work was.

Business families have remarkable and compelling stories to share with their children, for great value to the family and the business.


Using History as a Leadership Tool

By John L. Ward

Business historians John Seaman and George David Smith wrote a superb article for Harvard Business Review (December 2012) that has particularly great value for family business leaders. Wise leaders can use their company’s history for many benefits:

  • Create a stronger sense of identity for employees ‐ ‐ they are affected with something larger than themselves
  • Show the need and capacity to adapt illustrating such from the past
  • Argue that successful change is possible and that adversity can be overcome with examples from before
  • Promote the enduring values that shape the culture ‐ ‐ especially drawing on stories from before
  • Learn the obstacles to change from understanding the history and culture
  • Broaden perspective when making significant decisions by exploring analogies from before and now

We find family businesses have an especially acute appreciation for history from which they can particularly benefit as outlined above.

The article reinforces some axioms we find well practiced by successful family business leaders:

  • Embrace tradition as a way to prove that, indeed, the company has a long history of change ‐ ‐ a tradition of innovation
  • When leadership changes, emphasize the platform of values that don’t change before promoting a new vision
  • Find those authentic values of the past that will enable the new behaviors for success ‐ ‐ reinterpreting their meaning in the contemporary context

Interestingly, the primary example used to argue these principles was the 3 generations of leadership history at IBM. The values regenerated to support a new future were:

  • Focus on customer needs and
  • customer service and
  • long term relationships and pursue
  • break through innovation

The authors conclude that IBM’s leadership, “found in IBM’s history a usable past ‐ ‐ one that helped them…persuade people to embrace necessary solutions to deep–seated problems, but also grasp the nature of these problems in the first place.”

As Seaman and Smith well show, history is a leadership tool more than an anniversary with “balloons and fireworks”.


Building the Long-Term Orientation

by John L. Ward

In a previous blog I wrote of recent research by Professors Lupkin and Brigham that offered clues to what Long-Term Orientation (LTO) means and how to see it in key prospective hires. Their three ingredients to LTO are:

I have aspirations for others. (Futurity)
I have respect for the lessons of tradition. (Continuity)
I believe sacrifice is rewarded. (Perseverance)

I now go on with my interpretations of their counsel on how to foster the LTO.

They propose three ways to facilitate an organization to think long-term rather than take a decision that only maximizes short-term economic gains.

1.         Emphasize attractive, vivid, compelling, non-economic outcomes for the benefit of other stakeholders. (Framing)

– “Let’s look forward to celebrating our 100th anniversary in
–  “Successful succession is the final test of greatness.”
–  “This decision will really make a difference for our

2.         Develop self-control – avoiding the natural emotional temptations of instant gratification. (Self-Control)

–  Establish accountability systems – boards, councils, frequent reporting.
–  Be public with commitments.

3.         Provide positive reinforcement on the journey to the long-term goal. (Anticipation)

–  “We’re doing something special” (rather than “Somehow this will all work out”).
–  “Let’s celebrate what we’ve accomplished so far!” (rather than highlight the unfortunate negative surprises).
–  “The journey is great for us” (rather than “we’re unresolved on some of the tactics”).

Human nature is to seek instant gratification and to avoid the anxiety of uncertainty. Maintaining the commitment to long-term aspirations, continuing the legacy, and “doing the right thing” requires conscious leadership attention. Otherwise the short-term will win out.


Managing as if the Future Mattered: What to Look for in Non-Family Executives and Board Members

by John L. Ward

It’s generally believed that “the long-term view” is the most valuable and most emphasized competitive advantage of family firms. If so, it seems critical that board members and executives share that perspective – otherwise there could be a troublesome cultural misfit. But how does one see the long-term view trait when evaluating prospects?

A paper by two highly respected academics provides excellent clues (and deeper insight) into what “long-term orientation” really means.[1]

They propose there are three dimensions to “long-term orientation.” Thinking particularly of each of these provides ways to gain more insight on critical hires. Doing so also offers ideas on what to emphasize in employee orientation and training.


“I’m excited about the future. By planning ahead we can achieve some things that are important to me. I have some socio-emotional goals (i.e., benefits for non-economic stakeholders, such as the community, employees, suppliers) that I believe it’s important to realize.”


“I want to steward and pass on our proud legacy and reputation. I believe in pursuing an enduring mission. I have great respect for the past and see the past as a bridge to the future.


“Doing the ‘right thing’ today will make the future plans possible. Though it takes time, thrift, persistence, patience and hard work are redeeming values.”

In short, a definition of long-term orientation is

  • I have aspirations for others;
  • I have respect for the lessons of tradition;
  • I believe sacrifice is rewarded.

If so, it’s natural to embrace the long-term thinking that’s so fundamental to family business identity and success.

[1] Tom Lumpkin of Syracuse University and Keith Brigham of Texas Tech University (2011)


Family Owners and/or Managers?

by John L. Ward

52% say that the next generation will be owners and managers
24% say next generation family will own but not manage
7% are currently owned by family but not managed by family

A recent survey[1] by PwC discovered these succession plans. They also learned that 25% will transfer ownership in the next five (5) years.

There are some interesting questions:

  • How well does non-managing family ownership work?
  • What is the role of the non-managing family owners?

We don’t’ know if non-managing family ownership works better or worse. But we have learned much about what family owners do:

  • Set the Vision and Values;
  • Establish the Owners’ Goals;
  • Design the Board;
  • Communicate Other Family Expectations – the Family Constitution;
  • Add Value by Supporting the Management and the Culture Whenever Possible.

We also offer this advice to family owners: “nose in, fingers out.”

[1] The survey was of more than 1,000 family businesses with a median size of $200m and a median firm age of 55 years.