Developing your Owner Strategy Statement

By Josh Baron and Rob Lachenauer

To capture and express what you value, owners should create an Owner Strategy statement, a document that articulates your purpose, goals, and guardrails. This statement becomes a sort of credo for your family business. It should answer three main questions:

• Purpose: Why do you own your business together?
• Goals: What trade-offs will you make between growth, liquidity, and control to achieve your purpose?
• Guardrails: What metrics and boundary conditions do you need to provide to the board and management to help them understand and implement your goals?

These three questions are highly interrelated. You will find that working on one question will inform your answer to another.

Developing the purpose of your family business should be a shared Owner Room and Family Room activity. Family members who are not owners are affected by your purpose and play critical roles in sustaining it, so involving them in the process will pay off even if it takes more time and energy.

Translating that purpose to goals and guardrails is an activity led by the Owner Room, though you should draw on the expertise and guidance of your board (if you have one) and your executive team. The board’s job is to ensure that management develops and executes a business strategy in line with your Owner Strategy. Even if your family business has not yet developed the Four Rooms, you will still benefit from mapping out the roles and clarifying who to involve in each level of the design of your Owner Strategy.

The Owner Strategy statement should be specific enough to help the board and management make decisions that require trade-offs. For example, you might decide to set a 15 percent return on invested capital as a minimum threshold for retained earnings. 

A good Owner Strategy statement should form the basis of a dialogue among owners, the board, and management.

Acting as a dashboard that identifies the metrics used to gauge success, the statement helps the owners know whether the business is meeting the objectives they have set, and it spurs dialogue when the business goes outside the established guardrails. Because a good Owner Strategy statement is a living document that owners refer to regularly, it should be revisited whenever there are meaningful changes to the internal or external environment.

One of the biggest mistakes family business owners can make is failure to articulate their Owner Strategy first to themselves and then to the rest of the company. Defining your Owner Strategy puts you in the position to create a company that accomplishes what you value most. Owning a family business creates an opportunity to choose your ownership adventure. That, after all, is part of the fun of building a family business and an enduring legacy.

A good Owner Strategy statement should form the basis of a dialogue among owners, the board, and management. Acting as a dashboard that identifies the metrics used to gauge success, the statement helps the owners know whether the business is meeting the objectives they have set, and it spurs dialogue when the business goes outside the established guardrails. Because a good Owner Strategy statement is a living document that owners refer to regularly, it should be revisited whenever there are meaningful changes to the internal or external environment.

One of the biggest mistakes family business owners can make is failure to articulate their Owner Strategy first to themselves and then to the rest of the company.

Defining your Owner Strategy puts you in the position to create a company that accomplishes what you value most. Owning a family business creates an opportunity to choose your ownership adventure. That, after all, is part of the fun of building a family business and an enduring legacy.

*Adapted from the Harvard Business Review Family Business Handbook by Josh Baron and Rob Lachenauer. Pages 91-95.

Josh Baron is cofounder and partner at BanyanGlobal Family Business Advisors. He works with the leaders of family businesses to define their purpose as owners and establish the structures, strategies, and skills they need to accomplish their goals.

Rob Lachenauer is a cofounder and managing partner of BanyanGlobal Family Business Advisors. Lachenauer works around the world helping families thrive.