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Emotional Ownership

A commonly accepted conventional wisdom in business is that emotions and business should be kept apart. However, results of management research studies conducted over the last decade indicate that, under certain circumstances, a lack of emotions can lead to business failure. The research indicates that the concept of “Emotional Ownership” is one of the key factors to guarantee the success of business, particularly when transferring a family-owned company from one generation to the other. If we consider the statistic that only one in ten family-owned companies survive beyond the third generation, it becomes clear why emotional ownership may be important as a key motivational factor for the members of the younger generation inheriting the business in order to discover and nourish their role within their family company.

The feeling of emotional ownership comes from two angles:
1. A self-generated, positive feeling in a family member that the family business does, or will, belong to them as a reward for their work and loyalty.
2. A belief in the words of the current generation who have consistently said, “Someday this will be yours.”

There are people with major ownership interests in the family-owned companies but who care little about the business, being concerned only with what will bring them the most profit. On the other hand, there are those who have no connection with the family business but feel a strong emotional connection or bond to the family-owned business. Hopefully, most family-owned businesses have the best of both—members of the next generation who will have major ownership interests in the business and who feel a strong emotional bond.

Rather than simply “owning” or being part of the family business, emotional ownership is indicated by these five sentiments:
1.I care about the company;
2.I feel as if I belong to the company;
3.The company is an important part of who I am;
4.I identify with the company;
5.What happens to the company matters to me.

Business owners know the importance of hard work and sacrifice needed to make a business successful. They also know the value of setting goals and disciplining themselves toward achieving these goals. Therefore it is the responsibility of the current generation of business owners to openly communicate with the next generation about their expectations and commitments related to the future of the family business. Being open doesn’t directly ensure that tensions won’t arise but it will reduce the chance for conflicts to arise and make potential misunderstandings more manageable.

Emotional ownership is something that can be managed and cultivated. Some of the areas that have been identified as positive motivators are:
• Identify and share family core values between generations in the family;
• Make clear to all involved the future vision of the family ownership structure of the business;
•Goals and expectations must be captured in policies, using agreements when and where appropriate;
• Talk openly about the benefits and burdens of owning and controlling the family business;
• If conflict emerges and persists, seek out professional family business advice;
• Express gratitude consistently and focus on the positive steps achieved.

Business ownership, especially in family-owned companies, is not only about the vested interest in the commercial success of the company but also the desire to develop and pass the business to the next generation of family members. A high level of emotional ownership is important to foster that desire. As no two businesses are the same, it is crucially important to audit your own family business with the objective of discovering if the family members who are in line to inherit the business have high or low emotional ownership of the enterprise.

Sadekya Fiduciary Partners.

Rudsel. J. Lucas TEP, Managing Director
The Triangle Office Building, Hoogstraat 20-22
P.O. Box 4750
Telephone: 599 9 4652698