Strategic Advantages to Taking the Long-Term View of the Family Enterprise
Date:
Feb 4, 2014
In spite of growing complexities, families around the world have managed to stay together for generations, and they reap significant benefits from the concentration of purchasing power and the preservation of family capital. The crisis of 2008 demonstrated clearly the advantages that families with private capital have - by not being forced to make short-sighted decisions at the behest of outside shareholders.
Third and fourth generation families in the U.S. say they have greater impact as a family by staying together, and they feel good about being part of something that is bigger than a single family unit. They are proud to be identified as a legacy family, and they grow up with an understanding of stewardship and the rewards of watching out for future generations.
These cousins know there are significant tax advantages to passing assets from one generation to another in trust. They recognize the value of pooling their purchasing power for the benefit of the smaller investors in the family. Many also note that having a structured investment policy provides the discipline to adhere to a long-term strategy, which ultimately benefits the entire family, especially those who are impatient and eager for income.
Strategic advantages
When we ask FOX members how they describe the benefits of taking a long-term view of family capital, here is what we hear from them:
Advantages As Owners
- Having a regular conversation about the value of the enterprise
- Funding events where cousins get to know each other
- Engaging in trust building activities to reinforce relationships
- Providing opportunities to develop new leadership skills
- Assisting with family leadership transitions
- Making periodic assessments on the state of the family
Advantages As Investors
- Keeping an orientation toward wealth sustainability
- Placing the focus on building family capital, not on distributions
- Having risk-adjusted returns understood by owners
- Separating governance from policy, and policy from implementation
- Adopting dispassionate, disciplined implementation of policies
- Developing incentive plans that support longterm thinking and results measurement
This blog post is excerpted from the new FOX white paper, "Taking the Long-Term View of the Family Enterprise," which documents the characteristics of a family enterprise and provides a framework for you to consider as you manage the transition from a business-centric family to a family-centric enterprise.