Distributed Ownership Tips for Family Businesses
By: Doug Gray, Ph.D., The Family Business Consulting Group
Many family business leaders describe ownership as a linchpin of their enterprise. Some, fearing family conflict and business indecision, seek ways to limit the distribution of ownership among their heirs. But a focused ownership strategy (e.g. assigning majority control to one heir) can lead to family disputes over fairness or a lack of social capital left in the business. When ownership is clearly defined with mutually acceptable values (e.g. stewardship, service, loyalty, integrity), then distribution is more likely to be successful. But what happens when ownership is not clearly distributed?
This article addresses two questions: 1) what is distributed ownership? and 2) how do business-owning families successfully manage distributed ownership?
1. What is distributed ownership?
Answers from my FBCG colleagues ranged from “that good feeling when the family business is in good hands” to “an endless series of scenes like in those Matrix movies.” Distributed ownership can be defined descriptively as “when multiple owners have different percentage levels of shares, or types of shares (e.g. voting, non-voting).” Distributions from generation 1 (G1) to G2 are typically from one or two founders to two or more owners, and that complexity increases with each distribution over time. The goal of distributed ownership is to move from now to next, from coexisting to maximizing your competitive advantage. In this article, distributed ownership can be defined as “how you co-design your flourishing family enterprise.”
Any functional definition needs to focus on “what works now” and “what may work until the next redistribution.” Consider the threats we know now. Amid COVID, globalization, political and social polarization, technological and security threats, decision-making for family business leadership has never been more
challenging. However, family business leaders have a resilient history. Flourishing family business leaders have many strategic advantages that can inform ownership discussions. Owners may make values-based decisions over longer terms (versus quarterly returns); owners can quickly access resources; and owners can invest or withhold resources quickly when required. The result is that family-owned businesses may have a competitive advantage over many publicly held companies.1
Distributed ownership can be defined as “how you co- design your flourishing family enterprise.”
The next few blog articles will describe 4 TIPS for what NOT to do, then 5 tips for WHAT TO DO in your Family Business.
For more details contact Doug Gray at
- the Family Business Consulting Group
2. or at the Family Business Collaboration
3. or contact us TODAY for the full article.
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