FFI Feature

The Challenges of Working with a Flat FOOT Enterprise

SUCCESSION

When I entered this field about a decade ago, I most frequently came across families who were preparing for a transition from one generation to the next, where the rising generation was working side-by-side with parents and other relatives who preceded them.

Ownership issues came to the foreground, for instance cases where siblings who did not work in the business but were co-owners, who required careful handling on account of the unique dynamics that may exist for family owners who are not active in the business.

While those situations continue to exist, and such families still reach out to practitioners for assistance, I’ve noticed a particular subset of families who are increasingly facing variations on this prevalent issue. I’ve encountered more cases of what I have dubbed the “FOOT,” i.e., the Family Owner-Operator Team.

Family Owner-Operator Teams

One major characteristic of a FOOT is that it contains a preponderance of family members who are active leaders in the day-to-day operations of the business. Perhaps a non-family member or two is involved at the executive management level, but the leadership is generally comprised of family members, each with their own responsibilities, and with frequent interactions as these duties often require coordinated actions.

While these team members have different roles in the day-to-day operations of the company, their ownership interests in the business may be essentially equal. Every family business practitioner talks about the importance of separating the discussions about operations from those regarding ownership, but when the same leadership team governs both and they interact every day, it’s easy to confound things.