Continuity Model Generation E-Book

Justin B. Craig

• Herausgeber: John Wiley & Sons
• Kategorie: Fachliteratur
• Sprache: Englisch

Seitenzahl: 312

Veröffentlichungsjahr: 2021

Beschreibung

Organize and plan for your family business's continued, intergenerational success Continuity Model Generation: Integrating Wealth, Strategy, Talent, and Governance Plans delivers a cohesive and comprehensive plan for family business leaders who seek to improve the chances of sustaining success across generations. Incorporating four distinct--but closely related--plans, Continuity Model Generation shows family businesses how to manage their strategy, their wealth, their talent, and their governance to achieve multi-generational success. The book also offers: * A coherent framework (Continuity Canvas) for the integration of its multiple plans affecting every critical aspect of the family-owned or controlled business * Straightforward and practical frameworks, meta-frameworks, and cornerstones to ground your family business's strategy * A variety of templates, checklists, and forms to organize your thinking and strategy Ideal for business-owning families, as well as their stakeholders and those who advise them, Continuity Model Generation: Integrating Wealth, Strategy, Talent, and Governance Plans is required reading for anyone interested in maintaining and developing family-based wealth.

Leseprobe

Table of Contents

Cover

Title Page

Copyright

List of Illustrations

List of Illustrated Tables

List of Configuration Plans

Acknowledgments and Appreciation

Introduction to the

Continuity Model Generation

Part I: 21 Frameworks and 6 Meta-Frameworks

Keystone Meta-Framework

Four Foundational Theoretical Approaches

Two Complementary Logics

Three Circles Framework

Familial Meta-Framework

The Big Tent Framework

RIPCC Best Practice Dimensions

Four Ps Framework

Four Cs Framework

Individual Meta-Framework

Five Servant Leadership Dimensions

Four Tests Framework

Four Leadership Priorities

Four Exit Strategies

Generational Meta-Framework

Four Ls Framework

Four Ownership Stages

Four Entrepreneurship Principles

Tactical Meta-Framework

Family Enterprise Heterogeneity Frameworks

Four Rs Framework

Four Strategy Dimensions Framework

Fundamental Meta-Framework

Four Trust Dimensions

Five-Stage Life Cycle Framework

Church and State Framework

Four Innovation Capabilities

Part II: The Continuity Canvas

Strategy:Strategic Planning for Continuity

Strategic Planning for Continuity I: Collecting and Collating Basic Information

Strategic Planning for Continuity II: Cornerstone Concept Equals a Quadruple-Bottom-Line Scorecard

Financial Perspective

Social Perspective

Environmental Perspective

Talent Perspective

Talent: Successors’ Talent Development Planning for Continuity

Successors’ Talent Development Planning for Continuity I: Collecting and Collating Basic Information

Successors’ Talent Development Planning for Continuity II: Cornerstone Concept Equals Develop an Informed Individual Philosophy of Stewardship

Values – History – Legacy

Financial Literacy and Value Creation

Governance Role Preparation

Individual Development

Wealth: Asset, Wealth, and Estate Planning for Continuity

Asset, Wealth and Estate Planning for Continuity I: Collecting and Collating Basic Information

Asset, Wealth, and Estate Planning for Continuity II: Cornerstone Concept Equals Produce a Handwritten Individual Legacy Statement

Governance: Governance Planning for Continuity

Governance Planning for Continuity I: Collecting and Collating Basic information

Governance Planning for Continuity II: Cornerstone Concept Equals Craft the Family's Governance Philosophy

Business Governance

Family Governance

Ownership Governance

The Foundation

Part III: Configuring a Plan for the Plans

Configuration Plan One

Configuration Plan Two

Configuration Plan Three

Configuration Plan Four

Part IV: Appendix

Educating Educators

A Program Example

References and Further Readings

References

Further Readings

Index

End User License Agreement

List of Illustrated Tables

Chapter 7

Illustrated Table 1 POPULATING THE FOUR PERSPECTIVES USING THE FRAMEWORKS

Chapter 8

Illustrated Table 2 POPULATING THE FOUR DEVELOPMENT CATEGORIES USING THE FRA...

Chapter 9

Illustrated Table 3 POPULATING THE ASSET, WEALTH, AND ESTATE CATEGORIES USIN...

Chapter 10

Illustrated Table 4 POPULATING THE FOUR GOVERNANCE CATEGORIES USING THE FRAM...

List of Illustrations

Introduction

Illustration 1 21−6−4×4

Chapter 1

Illustration 2 AGENCY

Illustration 3 STEWARDSHIP

Illustration 4 RESOURCE-BASED VIEW

Illustration 5 PRINCIPAL COST

Illustration 6 TWO COMPLEMENTARY LOGICS

Illustration 7 FULLY DEVELOPED THREE CIRCLES FRAMEWORK

Chapter 2

Illustration 8 THE BIG TENT APPROACH

Illustration 9 RIPCC FRAMEWORK

Illustration 10 THE FOUR Ps FRAMEWORK

Illustration 11 THE FOUR Cs FRAMEWORK

Chapter 3

Illustration 12 SERVANT LEADERSHIP FRAMEWORK

Illustration 13 THE FOUR TESTS FRAMEWORK

Illustration 14 FOUR LEADERSHIP PRIORITIES

Illustration 15 FOUR EXIT STRATEGIES FRAMEWORK

Chapter 4

Illustration 16 THE FOUR Ls FRAMEWORK

Illustration 17 FOUR OWNERSHIP STAGES

Illustration 18 FOUR ENTREPRENEURSHIP PRINCIPLES

Chapter 5

Illustration 19 FAMILY HETEROGENEITY FRAMEWORKS

Illustration 20 FOUR Rs FRAMEWORK

Illustration 21 FOUR STRATEGY DIMENSIONS FRAMEWORK

Chapter 6

Illustration 22 FOUR TRUST DIMENSIONS

Illustration 23 FIVE-STAGE LIFE CYCLE FRAMEWORK

Illustration 24 CHURCH AND STATE FRAMEWORK

Illustration 25 FOUR INNOVATION CAPABILITIES FRAMEWORK

Chapter 7

Illustration 26 THREE-STEP APPROACH PLAN FOR THE STRATEGIC PLAN

Chapter 8

Illustration 27 THREE-STEP APPROACH PLAN FOR THE SUCCESSORS’ TALENT DEVELOPM...

Chapter 9

Illustration 28 THREE-STEP APPROACH PLAN FOR THE ASSET, WEALTH, AND ESTATE P...

Chapter 10

Illustration 29 THREE-STEP APPROACH PLAN FOR THE GOVERN-ANCE PLAN

Guide

Introduction to the Continuity Model Generation

Cover Page

Title Page

Copyright

CONTINUITY MODEL GENERATION

List of Illustrations

List of Illustrated Tables

List of Configuration Plans

Acknowledgments and Appreciation

Table of Contents

Begin Reading

Educating Educators

References and Further Readings

Index

WILEY END USER LICENSE AGREEMENT

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CONTINUITY MODEL GENERATION

Integrating Wealth, Strategy, Talent, and Governance Plans

JUSTIN B. CRAIG, PhD

Copyright © 2022 by John Wiley & Sons, Inc. All rights reserved.

Published by John Wiley & Sons, Inc., Hoboken, New Jersey.

Published simultaneously in Canada.

No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, scanning, or otherwise, except as permitted under Section 107 or 108 of the 1976 United States Copyright Act, without either the prior written permission of the Publisher, or authorization through payment of the appropriate per-copy fee to the Copyright Clearance Center, Inc., 222 Rosewood Drive, Danvers, MA 01923, [phone], fax [phone], or on the web at www.copyright.com. Requests to the Publisher for permission should be addressed to the Permissions Department, John Wiley & Sons, Inc., 111 River Street, Hoboken, NJ 07030, [phone], fax [phone], or online at http://www.wiley.com/go/permission.

Limit of Liability/Disclaimer of Warranty: While the publisher and author have used their best efforts in preparing this book, they make no representations or warranties with respect to the accuracy or completeness of the contents of this book and specifically disclaim any implied warranties of merchantability or fitness for a particular purpose. No warranty may be created or extended by sales representatives or written sales materials. The advice and strategies contained herein may not be suitable for your situation. You should consult with a professional where appropriate. Further, readers should be aware that websites listed in this work may have changed or disappeared between when this work was written and when it is read. Neither the publisher nor author shall be liable for any loss of profit or any other commercial damages, including but not limited to special, incidental, consequential, or other damages.

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Library of Congress Cataloging-in-Publication Data is Available:

ISBN 978-1-119-75930-0 (Hardback)

ISBN 978-1-119-75935-5 (ePub)

ISBN 978-1-119-75929-4 (ePDF)

Cover image: © GETTY IMAGES | OXYGEN

Cover design: PAUL McCARTHY

List of Illustrations

Illustration 1: 21−6−4×4

Illustration 2: Agency

Illustration 3: Stewardship

Illustration 4: Resource-Based View

Illustration 5: Principal Cost

Illustration 6: Two Complementary Logics

Illustration 7: Fully Developed Three Circles Framework

Illustration 8: The Big Tent Approach

Illustration 9: RIPCC Framework

Illustration 10: The Four Ps Framework

Illustration 11: The Four Cs Framework

Illustration 12: Servant Leadership Framework

Illustration 13: The Four Tests Framework

Illustration 14: Four Leadership Priorities

Illustration 15: Four Exit Strategies Framework

Illustration 16: The Four Ls Framework

Illustration 17: Four Ownership Stages

Illustration 18: Four Entrepreneurship Principles

Illustration 19: Family Heterogeneity Frameworks

Illustration 20: Four Rs Framework

Illustration 21: Four Strategy Dimensions Framework

Illustration 22: Four Trust Dimensions

Illustration 23: Five-Stage Life Cycle Framework

Illustration 24: Church and State Framework

Illustration 25: Four Innovation Capabilities Framework

Illustration 26: Three-Step Approach Plan for the Strategic Plan

Illustration 27: Three-Step Approach Plan for the Successors' Talent Development Plan

Illustration 28: Three-Step Approach Plan for the Asset, Wealth, And Estate Plan

Illustration 29: Three-Step Approach Plan for the Governance Plan

List of Illustrated Tables

Illustrated Table 1: Populating the Four Perspectives Using the Frameworks

Illustrated Table 2: Populating the Four Development Categories Using the Frameworks

Illustrated Table 3: Populating the Asset, Wealth, and Estate Categories Using the Frameworks

Illustrated Table 4: Populating the Four Governance Categories Using the Frameworks

List of Configuration Plans

Configuration Plan One

Configuration Plan Two

Configuration Plan Three

Configuration Plan Four

Acknowledgments and Appreciation

First, I respectfully acknowledge the family of business-owning families worldwide who have taught and inspired me, and countless contemporaries, through their commitment to establishing models that ensure future generations continue to make significant social and economic impacts. Thanks for allowing me to stalk you!

Second, to those whose thinking, testing, pivoting, and retesting have contributed to my ability to interpret and share the 21 frameworks and bring them together as the Continuity Canvas. I am fortunate to have worked closely with several of the family enterprise field's pioneers over the past two decades. Notable amongst these are my two main mentors (and mates), Professors Emeriti Ken Moores and John Ward. These two gentle men have more in common than they know…And I know that because I have been fortunate enough to spend countless hours learning at their feet. Ken and John, I hope this book brings your thinking to a new generation of family enterprise zealots, and I'll do my best to ensure it does. Your fingerprints are all over these pages.

I also need to tip my hat, in no particular order, to the colleagues and practitioners who have helped craft my thinking and enflame my passion for family enterprise. To the Dennis family for sharing your journey with me for the past two decades; thank you for the Four Rs as well as the Church and State framework. To the Urrea family, who have recently brought additional texture and sophistication to the Church and State approach to governance. To the Millers for their amazing work with the Four Cs framework… truly groundbreaking. To Professor Ivan Lansberg, whose eloquent portrayal of the Four Tests is timeless. To the pioneering Professor John Davis and late Renato Taiguiri, who gifted us such a sound foundation through the Three Circles paradigmatic framework. To my friend Professor Jose Liberti, who enlightened me on the four ways to capture value. To Jim Davis and his colleagues for introducing me and others to stewardship as a theory. To Jim Ethier for helping me understand what Governance Planning really means. And to Drew Everett, who helped me appreciate the meaning of Successors' Talent development. To the Lee family, for allowing me to understand the true meaning of sibling partnership. And to the many families who helped me understand the true meaning of long-term orientation and stewardship.

A separate acknowledgement to friends who have helped me more than they know. To Dr. Dennis Jaffe for his guidance along my trip to now. Dennis was instrumental in getting me started and keeping me going. It was he who provided the final push and the invaluable recommendation to Wiley. And to Caroline Coleman Bailey and her network at the innovative Premier Growth organization. And last but far from least, to Professors Eric Clinton and Catherine Faherty as well as their Irish family business community at Dublin City University. Much of what you will read in the pages that follow was tested for its final ‘proof of concept' with Eric's, Catherine's, and Caroline's learning communities.

To my friends in the professional services community, thank you for helping me to appreciate your important role more fully, and for helping me discover more than just the many moving parts of estate, wealth, and asset planning. In particular, I thank Bruce Hatcher from BDO Australia and Jonathan Flack and Jay Mattie from PwC US. Their passion for genuine understanding has motivated many advisors and subsequently helped countless business-owning families.

I also owe a ridiculously huge debt of gratitude to several people I have never actually met, but whose work I have long admired, “borrowed from,” and paraphrased in these pages. Specifically, to Dr. Ichak Adizes, whose understanding of life cycle is without peer; to Professor Emeritus Robert Kaplan and David Norton for sharing their Balanced Scorecard with me and the world; to Professor Sara Sarasvathy, whose work introducing effectual reasoning has made the complex simpler for so many of us; and to the global community of trust researchers whose work in understanding trust (within, between, and among teams of decision-making teams in family enterprises) underpins everything.

And finally, to my many colleagues at the institutions I have had the privilege to serve. To those who were with me at Oregon State University, Northeastern University in Boston, the Kellogg School of Management at Northwestern University, Dublin City University, and at my alma mater, Bond University. And to other colleagues including Professors Tom Lumpkin, Clay Dibrell, Don Neubaum, and Scott Newbert, who have pushed and challenged me along my anything-but-typical academic journey. And to Catharina Jecklin and Anke Steinmeyer, two doctoral students at Bond University, who represent an exciting new generation of thinkers.

You are all responsible for the Continuity Model Generation. Indeed, these pages harness my intellectual restlessness, which you all have tolerated and nurtured, and for that I am deeply grateful.

Justin

Introduction to the Continuity Model Generation

This book is intentionally modelled on Wiley Publication's Business Model Generation, written by Alexander Osterwalder and Professor Yves Pigneur and co-created by an amazing crowd of 470 practitioners from 45 countries.

What is significant, and not widely comprehended, is that the Business Model Generation is actually about a movement… a generation. This movement has been insanely successful as it captured a generation that pined for, and subsequently related to, a refreshing way of thinking and acting. They evolved from the Business Plan Generation.

The Continuity Model Generation has morphed in a similar way. Seeking a refreshing approach, this generation of scholars and practitioners from across the globe evolved from the Succession Plan Generation.

For the Business Model Generation there are nine building blocks that form the basis for “a handy tool,” i.e. the Business Model Canvas.

For the Continuity Model Generation there are 6 robust meta-frameworks, made up of 21 stress-tested frameworks with a total of 87 dimensions that form the foundation for the development of 4 “essential for continuity” planning processes, each with 4 segments and a nuanced cornerstone concept. These combine to deliver a tool, which is also very handy. We, the continuity model generation, unashamedly call this the Continuity Canvas.

Welcome to the movement.

Illustration 1 21−6−4×4

Twenty-one frameworks, six meta-frameworks and four plans, each with four components… It all fits on a napkin!

Let the learning and creating begin…

Part I21 Frameworks and 6 Meta-Frameworks

Keystone Meta-Framework

Knowledge of this meta-framework's keystone, four theoretical approaches, two logics, and three circles will enable anyone to understand and interpret with some authority the complexity of the tripartite family, business, and ownership landscape as well as gain insight into how these areas function independently and interdependently.

Four Foundational Theoretical Approaches

Agency Theory

Agency theory explains so much of the world. Originating in arguments presented as early as 1932, agency theory describes what happens when owners appoint others to act on their behalf—or, in the theoretical jargon, when principals appoint agents. The core argument is that any organization, at some point, will reach a stage, due to growth or expansion, where the principal cannot do everything that needs to be done, so they must appoint someone to do some of the work. This eventuality brings about or facilitates a cost: the person, or agent, appointed by the principal to act on their behalf will require monitoring, which incurs agency costs, also known as monitoring costs. As a leader of a third-generation European family enterprise shared insightfully, “My sole job is to reduce agency costs.”

Broadly, then, the job of a leader is to put in place mechanisms in the organization to ensure that agents’ behavior is aligned with interests of the principals. This alignment is achieved through incentives and perquisites.

Importantly, agency costs occur throughout an organization. At the organization's head, agency costs appear when the owners appoint the board to act on their behalf. The board is monitored through measures such as the strategic planning process and other governance-related and regulatory mechanisms to ensure those appointed by the owners truly act on their behalf. This is predominant in publicly traded companies but is also the case for private companies, particularly in mature generational businesses with more complex governance structures.

Moreover, one of the responsibilities of the board of directors is to appoint and monitor the CEO. Agency costs, or the potential for agency costs, will occur if the CEO's actions, decisions, or behaviors are not aligned with those of the board of directors, who are acting as representatives of the owners.

Moving down through the organization, there are also potential agency costs when the CEO appoints their management team. This potential eventuates if those top executives are not aligned amongst themselves.

If you keep the thread going, further down the organization the senior management team is charged with overseeing different areas, be it marketing, finance, IT, logistics, sales, or others. Again, there is potential for agency costs in misalignment of the senior management team with those appointed as division leaders or department heads.

These middle managers or supervisors, in turn, will employ line staff, resulting in yet another principal–agent dyad, and the potential for more agency costs.

As such, an organization represents a chain of principals and agents, with the same individuals or entities taking on either role, depending on the dyad relationship in question. Recall, at the top of the organization, the principal was the owner, and the board was the agent; then the board was the principal, and the CEO was their agent; then the CEO was the principal, and their agent was the top management team. The top management team members then represent the principal in their dyadic relationship with their line employees. And so on.

So, as should be evident, agency costs, or the potential for agency costs, are ubiquitous throughout all organizations. It is for this reason that agency is one of the frameworks in the keystone meta-framework.

Family enterprises are not immune to agency costs, or the potential for agency costs. They too incur costs throughout the organization and the family. In the early days, the owners are also the managers, so there is a reduction of agency-related costs. But as the company evolves and the family grows, the owners typically must appoint non-family employees and managers to assist in operations and non-family directors to assist in governance. Family and non-family members will contribute to the potential for agency costs if they are not aligned with the values, beliefs, or vision of the core ownership group.

In family enterprises there are four specific categories of agency costs. The first category is probably the most common and easiest to comprehend: entrenchment. Here, a founder, or any senior executive or other employee becomes entrenched in their position and their way of doing things. This happens not only in the domain of business-owning families, but, typically, entrenchment-related agency costs will be incurred if a senior executive or, particularly, an incumbent leader is not willing to succeed responsibility to the next generation and stays too long in their role. These costs relate to being wedded to old ways and the unwillingness to embrace change and innovation, which, paradoxically, were likely the hallmarks of the executive's earlier leadership and a major reason for their success.

The second theoretical dimension related to agency costs is adverse selection. This effectively says that the best person for a given job or position should be appointed regardless of whether that individual is family or non-family. As is the case for non-family businesses as well, there is a large potential to incur agency costs should the wrong person be appointed, such as when nepotism is involved.

The third agency-cost-related category relates to information asymmetry. Here, there will be cost incurred, or the potential for costs, if information is kept from people who should be given access to it or used inappropriately by those with access. For example, information asymmetry manifests in the form of insider trading in publicly traded companies, when someone who has access to superior information acts on that information to benefit themselves at the company's expense. This type of cost is potentially rife in family enterprises where those working for the business in day-to-day operations or in executive roles have access to information that those not working in the business lack. It also manifests in boards, when a board member has access to information others do not and acts on that information in an inappropriate way.

Finally, the potential for agency costs is also associated with altruism. Here the problem can be that all family members will be treated equally—such as offered the same compensation or similar-level business roles—despite their divergent contributions to the business or the family in governance or other roles. This is a recipe for disaster.

To recap, entrenchment is when incumbents overstay their welcome, preventing effective succession; adverse selection is also known as nepotism and causes problems when family members are appointed to positions for which they are not qualified; information asymmetry, also known as insider trading in publicly traded companies, denotes situations where access to superior information is used inappropriately; and altruism, in this context, involves treating everyone equally regardless of what they contribute (Illustration 2).

Illustration 2 AGENCY

Achievement of continuity requires understanding and minimizing agency-related costs. One way to do that is through the Continuity Canvas's four essential plans. A fundamental continuity model concept, and a key way to reduce agency costs, is to ensure that agents act as stewards, as we discuss next.

Stewardship Theory

Stewardship theory defines relationships based on behavioral premises not addressed by the principal–agent interest divergence that agency theory poses. According to stewardship theory, agents’ objectives can be aligned with those of the organization, and the utility gained through pro-organizational behaviors is higher than those gained through individualistic, self-serving behaviors.

If the agent is intrinsically motivated, they will most likely design an organizational setting where higher-order needs are encouraged and fostered. In an effort to pursue these higher-order needs, agents will be motivated to work harder on behalf of the organization, a condition that aligns their behaviors with their principals’ interests. Under such conditions, the potential for opportunism is reduced (but not eliminated) as agents gain little or no utility (and, in fact, may lose utility) by pursuing tangible, self-serving economic rewards. The more agents value intrinsic rewards, the less likely they will be to deviate from the interests of the organization and the more likely that they will protect their principals’ interests.

According to stewardship theory, the stewards’ objectives are aligned with those of the organization and its stakeholders, including goals such as sales growth, innovation, and profitability as well as nonfinancial objectives, such as ensuring the passing of the firm to the next generation. Indeed, stewards not only recognize their obligation to protect the interests of the organization but also believe that they are morally obligated to pursue them.

According to Jim Davis, David Schoorman, and Lex Donaldson, the authors of the seminal stewardship work (Davis, Schoorman, and Donaldson 1997), stewardship can be characterized by six interrelated dimensions: intrinsic motivation, organizational identification, use of personal forms of power, collectivism, low power distance, and involvement orientation (Illustration 3). They propose that, unlike agency theory, which emphasizes economic rationality, the concept of stewardship captures other-focused, prosocial non-economic behaviors. More specifically, in contrast to agency-based situations, where extrinsic, tangible, and exchangeable commodities are used to motivate and reward employees, a stewardship-based environment will emphasize intrinsic rewards that foster intrinsic motivation, such as opportunities for personal growth and achievement, affiliation, and self-actualization. To fulfill these higher-order needs, stewards’ intrinsic motivation will push them to work harder on behalf of the organization, which in turn aligns their behaviors with their principals’ interests. Generally, stewards will work harder to achieve the organization's goals when they believe their work is meaningful and their tasks are significant.

Organizational practices that emphasize employee growth and signal managerial support to employees can provide stewards with the rewards they seek and nurture their intrinsic motivation.

Another key distinction of stewardship is that it fosters members who identify with the organization and view it as an extension of themselves. According to Davis et al. (1997, p. 29), “identification occurs when managers define themselves in terms of their membership in a particular organization by accepting the organization's mission, vision, and objectives.” Stewards, therefore, have a strong sense of attachment to their organizations, possess high levels of psychological ownership, and wish to see their organizations succeed. Relatedly, stewards have a psychological preference for using personal power instead of institution-based forms of power. Rather than flowing from formally established authority, personal power stems from interpersonal relationships, is often built over time, and is based on mutual trust, norms of reciprocity, and information exchange.

From an organizational—as opposed to individual—level, stewardship directs behavior toward enhancing the collective good. A collectivist organization emphasizes the accomplishment of organizational goals, and individuals define themselves as part of the organization, one in which group identity and a sense of belonging reign supreme. That is, organizations with a stewardship climate are more likely to emphasize collectivism over individualism.

Such organizations are also identifiable by low power distances between managers and subordinates. Power distance is the extent to which less powerful members of an organization accept an unequal distribution of power across organizational levels. In organizational settings characterized by a high power distance, people with less power are dependent on those with high power and status, and special privileges are given to those with higher rank. Conversely, in organizations with low power distances, processes and interactions are egalitarian, inequalities are discouraged, and members are treated equally.

Finally, stewardship engenders a high involvement orientation. High-involvement work practices expand employee autonomy and involvement in decision-making processes and produce beneficial results for organizations and their employees. For example, such systems offer employees the chance to expand their knowledge and task-level expertise, involve people across levels in important organizational processes, and link individual performance to organizational outcomes. Reward systems are linked to performance in a way that instills individuals with the desire to accomplish organizational goals. Such involvement-oriented management environments, in which people are enabled to reach their potential and awarded increasing responsibilities and challenges, are consistent with a stewardship orientation and with the pursuit of aligning individual and organizational objectives.

We can plot the six dimensions of stewardship on a series of continua. For example, motivation can be anchored by extrinsic at one end and intrinsic at the other. For culture, it is collectivist and individual; power distance is high versus low; involvement orientation is involved versus detached; power is positional versus personal; the extent to which individuals view the business as an extension of themselves is high versus low. It is important to note that each of these dimensions, depicted through the series of continua, do not represent an either–or, or all–or–none, situation. For example, someone is not either intrinsically or extrinsically motivated; they will fall somewhere along that dimension. Thus, we can better understand stewardship by recognizing that a recommended position along a given continuum leans toward the preferred stewardship characteristic end.

Integrating the stewardship and agency arguments, or theoretical perspectives, we can suggest that it is preferred that agents appointed by principals are stewards. Below we embellish this further with the addition of the steward, or the concept of stewardship, to the three circles framework.

Without giving too much away, but as a way to reinforce the conceptualization of agents as stewards, continuity modelling is predicated on the notion that owners need to be stewards, that families need to be stewards, and that managers need to be stewards, who are more likely to: be intrinsically motivated, see the business as an extension of themselves, and use personal rather than positional power in companies characterized by collectivist cultures, low power distances, and a strong involvement orientation.

If being a steward is at one end of a continuum, what is at the other? It was only recently that I have begun to figure this out. The inverse to being a steward is being a corporate psychopath. This may sound confronting, and it is. The characteristics of a corporate psychopath, as defined in the psychology literature, can easily be accessed, and this is encouraged if you, like me, were wanting to better understand others who thrived in plain sight, even though their behaviors were so contrary to others in the system. A cursory review of this literature will reveal that while the word “psychopath” is a popular one, it's a colloquial term, not a medical one. The technical diagnosis that appears in the Diagnostic and Statistical Manual of Mental Disorders is “antisocial personality disorder.” A closer investigation will reveal that psychopathy is one of three traits that make up what the personality psychologists refer to as the Dark Triad, with narcissism and Machiavellianism being the others.

Illustration 3 STEWARDSHIP

Resource-Based View

The resource-based view (RBV) of the firm suggests that firms survive based on their ability to combine heterogeneous and imperfectly mobile resources. Broadly, the RBV incorporates the complex, idiosyncratic, and unique nature of a firm's internal processes and intangible assets, including the values, beliefs, symbols, and interpersonal relationships that individuals or groups within the firm possess. As such, the RBV focuses on an analysis of the nature, characteristics, and potential of a firm's resource base and assumes that each firm's internal resources and capabilities are heterogeneous, which ultimately delivers a competitive advantage. Barney (1991) identified that in order to contribute optimally to firm sustainability, resources must be valuable, rare, imperfectly imitable, and non-substitutable (VRIN).

Resources are defined as anything that could be thought of as a firm's strength or weakness and at any given time could be defined as those (tangible and intangible) assets tied semi-permanently to the firm. Firm resources in the RBV perspective fall into four capital-related categories: physical capital, human capital, organizational capital, and process capital. Overcoming newness means that the venture has been able to distinguish itself from others by building a unique combination of resources in these categories.

Using the RBV framework, Sirmon and Hitt (2003) argued that family businesses evaluate, acquire, shed, bundle, and leverage their resources in ways that are different from those of non-family businesses. In part, these unique resources can emerge from the fact that family members often also act as owners and/or managers. In the family business context, the term “familiness” defines the unique bundle of idiosyncratic resources and capabilities that family firms hold (Habbershon and Williams, 1999). As such, familiness is one of the intangible factors in the RBV (Illustration 4).

Identifying the resource categories that are idiosyncratic is only part of the process. As, if not more important, is understanding what the firm does with resource-related processes or actions. Effectively managing the resources is crucial to creating a competitive advantage and this requires an understanding of how resources are accumulated, bundled, and leveraged. More specifically, Sirmon and colleagues consider resource management to include structuring (i.e. acquiring, accumulating, and divesting) the portfolio of resources, bundling (i.e. stabilizing, enriching, and pioneering) resources to build capabilities, and leveraging (i.e. mobilizing, coordinating, and deploying) capabilities in the marketplace. The synchronization of these processes is important to create value and, in the context of this conversation, contribute optimally to continuity.

Illustration 4 RESOURCE-BASED VIEW

Principal Cost Theory

An additional, very useful component in the theoretical understanding of family enterprises, and how they improve the chances of continuity, is principal cost theory (Goshen and Squire 2010).

The two major cost dimensions or components of principal cost theory are conflict and competence (Illustration 5). The argument here is something that has long been overlooked: that there are costs in the appointment of principals. Where these costs manifest in the continuity model generation perspective is when owners are ill-prepared for the responsibility of ownership. This is also the case for directors, but that is covered largely by the agency cost argument. Regardless, understanding or appreciating that owners are potentially compromising their potential by falling victim to one or both of these principal costs characteristics is important.

Like many of the dimensions included in the 21 frameworks, the dimensions of conflict and competence are easy to interpret, remember, and explain. These two dimensions and how they apply in family enterprise are fundamental for those committed to continuity. Indeed, the primary objective as a continuity model generation member is to do whatever it takes to put the family enterprise in position for seamless continuation. That is not to say this is a simple task and there won't be plenty of opportunity to engage in conflict. For example, not everyone will be convinced that the conversation should move from traditional succession planning to a new mindset evolving toward Continuity Model Generation; there will be pushback. Expecting this pushback and framing it in terms of the principal cost is a simple solution.

Similarly, confusion around the concept of competence is likely and should be anticipated. The solution lies in explaining that costs will be incurred in the ownership group if people are not prepared for the responsibilities of ownership. This does not point the finger at any one person but alerts the collective of the issue, which can be addressed through education and communication. In reality, this is not a hard sell. As will become more evident throughout this book, Continuity Model Generation proponents seek a fresh, unifying approach to reduce conflict and tension within, between, and among stakeholders in the family enterprise system. This conflict and tension, in principal–cost theoretical terms, is explainable through the dimensions of (i) conflict of interest, and (ii) individual competency, both of which can be addressed through systematic education and communication.

Illustration 5 PRINCIPAL COST

Two Complementary Logics

One simple way to understand what's different about family enterprises is to consider that they are driven by two complementary logics. Specifically, they pursue economic and social agendas concurrently. They balance doing well and doing good. They are committed to a healthy business with a long-term perspective characterized by patient capital and at the same time dedicated to contributing to the social wellbeing of their family, employees, and the communities in which they operate. Understanding this keystone characteristic is important for the development of a continuity model mindset.