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Equity Ownership

Kevin Costner has turned to TV series with ‘Yellowstone,’ an entertaining show set in wild Montana. The story involves cattle, guns, tough love, money, anti-indigenous racism, politics, and widespread corruption. It is a modern-day ‘Dallas’ with all themes taken up a few notches to satisfy the abysmal attention span of our times.

At the center of the drama is a succession question related to a ranch with a multi-generational history. It is not the first time nor the last that such a challenge feeds a storyline. Indeed, succession processes are a vibrant and complex topic.

Family businesses blend three roles or identities: family membership, employment, and ownership. Each of them is complex on its own. Their compounding can be significantly distressful. To the extent that some form of equilibrium is ever found among them, it is inevitably shaken by the perspective of a looming succession.

Paradoxically, while family businesses are said to take a long-term perspective allowing them to weather short-term uncertainties, they tend to take a short-term one when it comes to a long-term certainty, namely human finitude.

The well-documented tendency by entrepreneurs to procrastinate when it comes to succession plans is related to the inherent complexity of the task and psychological barriers. For example, one or more members of the old generation may be struggling to deal with the disturbing question of mortality and legacy. Founders may not appreciate the noble objective of making themselves irrelevant.

In addition, it is painfully delicate to tell an heir apparent that they are not considered a successor from a business leadership point of view. ‘Succession’ and ‘success’ share the same Latin roots suggesting ‘progression.’ For the young generation, (not) succeeding generally means (not) succeeding.

As he sought to capture human life’s pitfalls, Rudyard Kipling might have added the following lines to his beautiful poem 'If'(with his talent) to suggest, as I would, that the last test of adulthood can only be passed towards the end of one’s life:

If you can build with your hands an empire/And be dispensable to its future If you can face a succession quagmire/And with care and time find a new owner Yours is the Earth and everything that’s in it/And—which is more—you’ll be a Man, my son!*

These considerations underline the notion that equity ownership is as important a skill as entrepreneurship. As any private equity firm would appreciate, owning is a business activity that requires a depth of expertise. It includes developing a corporate vision; picking, supporting, and challenging a leadership team; overseeing the performance of the business; fostering the effectiveness of the Board and its members; driving important decisions, including acquisitions; and, last but not least, deciding whether and when to sell all or part of a company.

Owning may be a privilege, but it is also an exceptionally challenging task.

* This line is the original ending which applies to all genders by extension

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