The Importance of Shared Purpose
The shared purpose in a family enterprise is the set of goals, objectives or outcomes that the owners are striving to achieve through being in business together, whether that is a commercial business or a family office, or both.
It is helpful to know that research on this matter has established that while families consistently prioritise financial concerns, they also consider non-financial objectives to be highly important. These non-financial returns on investment (also referred to as socio-emotional wealth) include the following.
Stewarding assets and passing the enterprise to successive generations.
Looking after various stakeholder interests like employees, customers and suppliers.
Keeping the family connected with each other through an interest in the enterprise as individual family members follow their own lifestyles.
Maintaining overall family harmony.
Providing career opportunities for family members in an uncertain world.
Being involved in a particular type of commercial activity to which the family feel passionately attached.
Putting something back into a local community or society generally by creating jobs or through philanthropy or by being engaged in other social or political activities.
Maintaining a positive image and respect for the family that is connected to being known as a family enterprise.
Building on this positive image to develop other commercial, social and political connections.
Encouraging entrepreneurship and risk taking among family members by providing them with resources, such as financial capital and social connections, in order to pursue their own ambitions.
Who decides the shared purpose?
At its best, a shared purpose represents a voluntary commitment by members of a family to be or remain in business together.
Some families prefer a discussion about the shared purpose to involve only the current family owners. Others believe that it should engage as many as possible of those who will be affected by the outcome, such as the next generation of the family, which might or might not include the wider family of spouses and partners. They might also want key non-family personnel who run or advise the enterprise to be involved in these discussions. It is worth thinking about the pros and cons of each approach.
Those who focus on the current owners argue – reasonably enough – that they can do whatever they want with their share of the family enterprise, subject only to any interests or claims that they either have to, or choose to, recognise. Sometimes concern about the impact on heirs of knowing too much about their future wealth results in them being told – eventually – about the plans for the future based on the Shared Purpose set by the seniors, rather than the next generation being involved in the planning.
What are the risks here? As well as inheriting a share of the family enterprise, the next generation may find that they have inherited a responsibility to abide by the shared purpose of their ancestors. If the ancestors dreamed of a multi-generational family enterprise that would continue for another 100 years, an heir who later would like to sell the enterprise and do something else may find that they have little, if any, opportunity to fulfil their ambition.
The alternative approach to setting the family’s shared purpose is to involve everyone of adult age – or at least maturity, since the two are not always correlated – who will be affected by whatever shared purpose is ultimately agreed. A broader discussion about the Shared Purpose can be challenging since outright honesty is not always possible or in some cases acceptable for cultural reasons. On the other hand, this type of discussion at least creates the opportunity for the key stakeholders to work together towards a consensus that balances the past with the future needs and ambitions of the family and the enterprise.
What if there is no shared purpose?
It cannot be assumed that every family enterprise will have a shared purpose. Not everyone wants to devote part of their adult years linked by a partial or total financial dependence on their relatives, which is what being in business with your family entails.
There is always the possibility that relatives will have different ambitions for the family enterprise. Family wanting to build an enterprise to pass to the next generation is a noble shared purpose. So is wanting to build and sell the enterprise in the foreseeable future. But it is difficult to imagine the same enterprise being able to satisfy these divergent aims of different relatives.
The absence of an authentic shared purpose might be hard news for family members who wants the family to continue being in business together, but accepting this reality might be better than binding a family together through their enterprise and into a life that could be unhappy. In such cases it is probably better for the family to separate their interests at the least financial and emotional cost possible.