What? FBS Family Enterprise Intentions
Through its consulting work and research FBS was the first to understand that the relationship between a family and its enterprise is enormously influenced by what the family who have ultimate power Intend for their investment. Intention describes where the owning family want to focus their time, passion and commitment. The different types of FBS Intention are Creating, Managing, Governing and Investing.
Creating
Being in control of building a new business or diversifying an existing business into new products or markets. The return on investment is a mixture of wealth and personal lifestyle choices, including a perceived opportunity to create a legacy (“making your mark”) at a tolerable level of risk (in terms of personal reputation and financial gain).Managing
Owning family dominates the main governing bodies and management in the Enterprise. The Enterprise concentrates on activities that can be family owned and family run. The return on investment is financial security balanced with other value-added returns such as job opportunities for the family and often the development and preservation of a family legacy of active involvement.Governing
Owning family actively oversees and monitors the Enterprise and their family legacy. The Enterprise is family owned but not family run. Management is delegated to outsiders hired to provide their talents. The return on investment is again financial plus other value added returns, this time including extending the legacy beyond activities that the family themselves can actively manage.Investing
Owning family treats ownership of the relevant assets strictly as an investment and would seek to sell if the investment didn’t perform. Family occasionally “run” the assets but often outside agents are hired for this purpose. The return on investment is entirely financial and about managing risk and return.Over generations Intention needs to be matched with the ability and interests of the controlling family; for example the wish to be a Managing Family depends on there being sufficient family members with the talent to fill the key executive roles in the family’s enterprise. In the absence of the necessary talent, continuity of the family enterprise can still be achieved by becoming a Governing or an Investing Family.
In some families there is a dominant Intention, and in more diversified enterprises, different types of Intention may co-exist; for example, Governing in relation to the original business but Investing in relation to a shared investment portfolio that has been built up to provide financial security for the extended family.
The importance of establishing Intention is that different Intentions need to be governed differently. For example in relation to a company
- A Managing Family would want to control the board, whereas a Governing Family would be more open to appointing “outsiders” to the board, provided mechanisms were in place for the owners to hold the board accountable.
- A Managing Family or a Governing Family would be more likely to accept restricted rules on share sales that balanced financial reward with continuity of a family legacy, than a family with an Investing Intention who would want as much value as possible out of their investment and, like any rational investor, to be able to sell shares if they produced a below-market rate of return.
