Redefining the Owners’ expectations of financial outcomes
OWNERS’ STRATEGY
Context
A second- and third-generation owner of a consumer goods company was struggling with designing and agreeing on a succession plan. There were no clear governance structures; a result of a more owner-operator culture. There was also no clear successor in the next generation and several G2 sibling branches were disengaged from decision making.
Ultimately, there was limited alignment and no structured forum for progress. Conversations about the future remained unresolved.
In response, and with G2’s endorsement, a new task force was formed, consisting of Next Gens from each branch. Believing that structure should follow strategy, the first task was to align around a common vision and financial expectations.
Work
The newly formed working group had diverse levels of financial experience. To ensure all members could contribute meaningfully, the first phase of work focused on equipping everyone with the language and tools required to discuss portfolio performance as an owner would.
This included covering simple metrics such as TSR, and addressing how to think about value and capital growth in a non-traded company. We also helped members develop a better understanding of risk, cost of capital, diversification and asset allocation. These concepts were then considered by the group in the context of historical data and current projections of the family’s holdings.
Collectively, the group better understood what they owned and were able to articulate a clear owners’ vision for the family around the Operating Business and an emerging Investment Office. They consolidated their collective insights and presented them to the Owners’ Council.
Impact
The Owners’ Council endorsed the working group’s output and syndicated the conclusions with the board of the operating company and the family office. Formal targets were then agreed for a target asset class allocation and an expected total return and a risk policy. These elements are now part of the annual performance tracking at the Owners’ Council.