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Q&A with Catalina Gaviria
Partner and Owner Strategy expert, CFEG
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Owners ultimately decide the big determinants for the family enterprise to remain successful.
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What is Owner Strategy?
An Owner Strategy keeps the owners’ hands on the steering wheel of their enterprise—as owners.
An Owner Strategy is a deliberate, pre-meditated, long-term plan that defines what the owners want to achieve with their joint assets and activities and how to get there—whether they own family businesses, financial investments, a family office, a foundation, or a combination. It articulates how the owners will grow their wealth and achieve their long-term vision and goals for what they own. It defines the pathway for the owners to continue to build value according to their values for another generation or more.
The development of an effective Owner Strategy integrates a range of meaningful insights. It asks the owners and next generation to reflect on their future. It conducts rigorous analysis of their businesses, assets, industries, and needs. It projects different scenarios from the owners’ perspective (which is different from the managers’ perspective). It maps the trajectory of the owners, family, and assets into future generations, taking into account evolving circumstances and goals (which could range from liquidity and buyouts to unity and engagement). It designs the assets and activities for the next growth stage, and the ways the owners will oversee them. It guides the governance forums and ownership group, defining their roles and mandates, goals and budgets. It defines what the next generation must do to prepare themselves to be future owners and governance leaders.
The Owner Strategy development process is collaborative and dynamic—co-created among the owners. The owners end up with a pragmatic long-term vision, roadmap, mandates for the governance forums, and a tactical plan to achieve their goals and continue their legacy.
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The story of any family enterprise is largely about what the owners choose to do with what they own.
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How does CFEG assist with Owner Strategy development?
The Owner Strategy development process is a collaborative partnership between the owners and CFEG. Owners ultimately decide the strategy. CFEG guides the process, structuring and provoking discussions, analyzing options, making sure the parts of the strategy are consistent, feasible and additive.
The owners participate in visioning and self-reflection exercises, educational workshops, design sessions, the analysis of options and scenarios, consensus-building and decision-making, and then championing the Owner Strategy.
The owners are asked to reflect on a range of topics related to their interests and concerns and the future. Below are 6 sample questions asked of the owners during the process:
- What do you, as owners, want to achieve with what you own, and what future are you trying to build for the family enterprise?
- What motivates you as owners and what goals and needs must the Owner Strategy serve? What are your options for different combinations of assets and activities to meet those goals? What are the trade-offs of different combinations (such as growth, liquidity and the risk you are willing to take)?
- What are your distinctive strengths as owners and as an enterprise? Are those strengths relevant for the future and how can they be passed on to the next generation? How should they shape what you keep, grow, change, disinvest, and invest in?
- How aligned are you around your shared vision, and what decision-making practices will help you reach consensus and speak with one voice as owners?
- What leadership, talent, governance, mandates to the governance forums, and oversight tools are needed to execute and monitor the Owner Strategy?
- How should you engage and prepare the next generation, integrate their perspectives, and raise the capability level as future owners?
What is an example of a complex decision that the Owner Strategy process helps owners make?
One of the hardest strategic decisions the owners face concerns capital allocation: Where should we invest to keep growing in ways that will balance growth, liquidity needs, risks and also strengthen unity and engage the next generation?
The owners must decide between reinvesting in their core business, investing in new companies or assets, launching new ventures, pursuing acquisitions, investing in private equity or venture capital, diversifying their liquid investments, experimenting in new sectors, or combining these paths. They do these while balancing their growth aspirations with their family’s risk appetite, liquidity needs, the engagement of the owners, and the interests of the next generation.
The list of capital needs goes beyond company and financial investments; the owners also need to invest in governance, family unity, education, talent development, legacy traditions, community activities, and philanthropy.
These are not mere financial decisions, but strategic choices that shape the future of the family, wealth, the overall enterprise, and what the owners achieve together in the world.
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These are not mere financial decisions, but strategic choices that shape the future of the family, wealth, the overall enterprise, and what the owners achieve together in the world.
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How is the next generation involved in the Owner Strategy development process?
Some of the benefits family owners typically experience from developing their Owner Strategy are increased engagement and commitment of the next generation and the opportunity to better get to know each other as owners or future owners.
The next generation is included in the process because the long-term vision and plan that is created belongs not just to the current owners, but also to the future owners. We engage both generations collaboratively in this exercise and dialogue. The process builds a sense of partnership between the generations and mutual accountability to one another for what is created. Of course, there is a distinction between having a voice in the process and having a vote. While we encourage the next generation’s voice to be incorporated, the current owners ultimately decide.
Being able to shape the future of the family enterprise often engages and excites the next generation. This is usually accompanied by talent development plans for the next generation to prepare themselves for future roles and contributions.
Why did CFEG develop the Owner Strategy methodology?
The Owner Strategy methodology is a natural evolution of our efforts to support family owners in achieving long-term success. We formalized the process after observing that few families proactively architect their overall assets and activities based on aligned family objectives.
Over the last several years, we observed that many families opportunistically build their family enterprise assets and activities over generations. Their current holdings often are the result of some combination of “golden gut” intuition, maintaining tradition, leveraging the family’s reputation and know-how, addressing family members’ interests, keeping the peace in the family, tax efficiency, and sometimes inertia. In other words, we saw too many families skip a rigorous analysis of their portfolio, not do adequate planning given industry and technology changes, overlook or avoid deeper conversations about the shifts in mindset, priorities, and visions that naturally come with generational change, and as a result not have an effective Owner Strategy.
After seeing this disconnect between what owners need to do to support their long-term success and the process they were using, we developed the Owner Strategy methodology. Owners need a clear roadmap for the sustainable growth of their assets (their companies, investments managed by their family office, entrepreneurial ventures) as well as for family activities (their philanthropy, talent, unity). As the ownership group grows in size and diversity over generations, and decision-making becomes more complicated, it is even more important for owners to have a single well-supported plan to guide them in the same direction. We believe this is a requirement to be successful long-term.
Why is it called Owner Strategy?
We call it Owner Strategy because the owners are the ultimate decision makers for their family enterprise. Owners have ultimate decision authority over the vision for the enterprise, the use of capital, the choice of talent and culture, the design of governance, and the passing of responsibilities and authority to the next generation. Owners fundamentally decide the big determinants for the family enterprise to remain successful and they either benefit from or bear the consequences of those decisions. That’s why we say that the story of any family enterprise is largely about what the owners choose to do with what they own. Because the strategy belongs to the owners, we call it Owner Strategy.
What is unique about CFEG’s approach to Owner Strategy?
Two aspects:
1) Each family’s Owner Strategy is unique and takes into account the owners’ aspirations, values, assets, industries, capabilities, opportunities, challenges, dynamics, and their next generation. Developing it is a process of co-creation and discovery, rigorous analytics, strategic thinking, and practical execution –– while honoring what has been built and giving attention and creativity to designing what’s next.
2) One of our deeply held beliefs at CFEG, which permeates our work with family enterprises, is that the family owners must keep their hands on the steering wheel of their enterprise—as owners. In our work, the owners not only co-create their Owner Strategy, but also drive and oversee its progress (with the support of good governance and management). In addition to guiding the creation of the Owner Strategy, we co-design with the owners the process, tools, and governance to effectively guide their strategy and monitor its progress. We embed these capabilities into the ownership group so the ongoing maintenance of the Owner Strategy can be done eventually without CFEG.
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