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Stewardship refers to the perspective of seeing the ownership of a family business as a responsibility to the next generation, and to employees, and to the community – rather than simply as a financial investment.

The role of Stewardship in Family Business
Stewardship is defined as “a perspective that founding family members view the firm as an extension of themselves and therefore view the continuing health of the enterprise as connected with their own personal well-being.” This means that a person who has this perspective does not go into business solely for financial gain. They go into this business to contribute something to the community and its workers. They want the business to grow and succeed long after they are gone. They are basically looking for long-term instead of short-term gain because of the desire to have future generations take over the business.
In order to start a successful family business there needs to be an entrepreneur who is not afraid to take risks, has good values, and is committed to making that business a success. This means that the business owner has to have the capability to instill those same morals into his own family members if he wants the business to be a continued success and take advantage of “entrepreneurial endeavors”. The founder of the business has to be a role model to the others by constantly pushing individuals to go above and beyond of what is expected of them and by that “affecting the firm’s ability to innovate and adapt”.
The founder of the business has to have a vision, which is an “inspirational description of what an organization would like to achieve or accomplish in the mid-term or long-term future. It is intended to serves as a clear guide for choosing current and future courses of action”. In that vision he has to have a clear and defined idea of what kind of culture he would like his business to have. Included in this culture are the beliefs, values, traditions, heritage etc. In order for his vision to be fulfilled, he or she has also has to be able to effectively communicate his vision to his family members as well as non-family members. If they are not an effective communicator, there is no chance of the vision to be carried out to future generations and therefore the continued success of the business.
To be able to have a profitable business, stewards need to do the following: “invest time and money in the future, attend to marketing and deal to assure the continued health of their companies, engage in the care and nurturing of their employees, engage in customer care activities and quality assurance, right size their human resources, right size their inventory and equipment resources, and hold themselves accountable for current and future results”. In order for your business to survive an economic downturn, the only thing that a good steward can do is to maximize its profits at all times so that when an economic downturn does occur, the business will still be able to carry on and be there long after the storm has passed. If the business does not reach its expectations, it is ultimately the founders fault as well as his family members, other employees as well as customers. It simply means that profit was not maximized to its fullest potential and the vision was not carried out to its fullest potential.
It has been stated that family businesses are more likely to succeed than non-family operated businesses. The reason for that being is that the founders take more pride into seeing their businesses succeed; therefore they put more time and effort into every decision that is made so that the company will be successful in the long run. Another reason family business tends to succeed more than others are that their money is that their own money is on the line so they make sure that they make sound financial decisions. That is especially the case when an outside vendor trusts that family business owner with his or her money because they are basically saying, “We trust you to make a successful business venture”. When a business person gets put into a situation such as that, they have much more pressure to put on them to make sure they are able to pay that money back that they are initially trusted with without putting the profit of the business at risk.
Stewardship is an essential asset to the success of a family business. A good steward has to have a clear vision of where he wants his business to go and know all the necessary steps that need to be taken so that his business can be passed on to future generations.
References
http://www.entrepreneur.com/tradejournals/article/189747491_2.html
http://www.businessdictionary.com/definition/vision-statement.html
http://forum.belmont.edu/cornwall/archives/005355.html
http://www.whartonfamilybusinessclub.com/PDF/GoodStewardship.pdf
Family Business 3E by Ernesto J. Poza

By Sanela Pestalic & Jessica Batts


Having an attitude of stewardship is good for the business

Family business leaders who view the family business as an opportunity to create value and benefit for others (e.g., future generations of the family; employees; the community) rather than solely an opportunity to build one's own personal wealth and power are more likely to focus on continuous improvement and more willing to take the risks required for long-term growth (Aronoff & Ward, 1992).

Goals and attitudes of stewards

Family business leaders who are stewards are more likely to:
  • seek to leave an enduring business
  • establish an specific approach to managing the business
  • use their family business as a model for helping other family businesses
  • carefully maintain the resources of the family business for the long-run (Aronoff & Ward, 1992).



References



Further reading and external links



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Categories: Governance