The ultimate goal of many enterprising families is growing a prospering organization stewarded by a committed group of united family owners. And while many succeed in developing a successful organization, they struggle with managing the increasingly dispersed and diverse family group.
As the family – and with it, the shareholder group – grows, it tends to grow apart: Family members become more distant over time, both geographically and emotionally. With many more relationships involved, some relationships naturally get more attention than others, diminishing the overall strength of family relationships over time. What is more, with every generation, the connection between individual family members and the business tends to get weaker, unless the family takes continuous and significant efforts to keep the family engaged and knowledgeable about the business (Baus, 2012).
Systematic ownership competence development can greatly enhance family capability and unity and strengthen the connection between the family and the enterprise. It enables family members to contribute to business success and to family functionality, in whatever role they choose or are given. Yet only few families dedicate enough resources to ensure that their family members become capable stewards of the family enterprise and stay that way (von Schlippe, Rüsen & Groth, 2021).
The Value Of Competent Owners
The success of any long-lived family enterprise depends on the quality of decisions made by its leadership. On the business side, this might include the top management team, the board of directors, and in some cases, some influential shareholder. On the family side, decisions are made by family shareholders, and very often members of the extended family without ownership. Ownership competence means nothing more than having the ability to make decisions that benefit the longevity and prosperity of the family enterprise system.
In some families the decision-makers may not have the business acumen one would expect to see; instead, their primary purpose may be to represent the family. For example, a family member serving as a board director may have no prior executive or even non-executive business experience. Yet, they are being asked to make decisions about business strategy, major acquisitions or divestitures, or human resource issues.
Successful, long-lived family enterprises rely on the ownership group’s intent to act as responsible and competent stewards of the family business. This includes owners’ ability to make timely, sound and well-informed decisions, and the capacity to remain a unified, aligned group even in the face of diverse interests and objectives (Binz Astrachan, Waldkirch, Michiels, Pieper, & Bernhard, 2020). For a family with a multigenerational vision, educating family members to become such competent, responsible stewards of the family enterprise is a responsibility, and not a choice.
What Is Family Ownership Competence?
Family ownership competence refers to the knowledge, skills, and capabilities that enable family shareholders to successfully perform their role(s) as owners and stewards and make sound decisions that contribute to the success of the firm and the functionality of the family (Vöpel et al., 2013). These competencies fall into three broad categories:
Business: Competencies related to one’s own family business (e.g., knowing about and making use of the firm’s history, key customers and suppliers, industry trends), as well as general business competence (e.g., finance, strategy)
Family: Competencies related to nurturing a healthy and unified family (e.g., family dynamics, communication, conflict management)
Individual: Competencies related to individual development and growth (e.g., boundary management, giving and receiving feedback, growth mindset)
Competence profiles differ depending on the role(s) a family member holds in the business and/or the family. For example, a family CEO or a family board chairperson ideally has strong competencies across all three dimensions: They intimately know their industry; they have a deep understanding for how family dynamics shape communication and conflict patterns; and they have a growth mindset that allows them to deal with feedback constructively. While it may be beneficial for a non-owning family member to also develop these competences, it is not a necessary requirement for them to successfully perform their role as a family steward (Binz Astrachan et al., 2020).
Ownership Competence Development In Business Families
Business schools generate tremendous revenues educating individuals who lead organizations on all levels of the hierarchy. Comparably fewer efforts are made to educate the individuals who own those organizations, and who oftentimes set the strategic course for managers to execute. Ownership education may be limited because we have so little research on ownership competence and what it takes to be a competent owner. However, given the economic and societal contributions of family enterprises around the world, business schools might be well-advised to address this shortcoming!
In their survey of 263 family firms, Vöpel and colleagues (2013) found that the majority consider developing ownership competence to be a decisive success factor. Respondents said ownership competence increases fami