At Burke Engineering, a fourth-generation company in a low-growth industry, shareholders were obsessed with creating liquidity and stoking the stock value against the day when a birth, a wedding or college bills might require them to cash out. In between shareholder annual meetings, they would harass the company's managers about liquidity and divert managers' time and energy away from productively managing the company. While managers invested much time investigating a potential recapitalization in order to fund short-term liquidity needs, they missed real business opportunities that might have yielded more long-term benefits. Not surprisingly, the company's sales and profits continued to slide.

Burke Engineering (not its real name) is hardly alone. Over the last decade, pressure to produce short-term financial returns and stock appreciation has diverted the attention of many CEOs away from long-term strategy and value growth. That's the compelling message that Bill George, retired leader of Medtronic, makes in his recent book, Authentic Leadership: Rediscovering the Secrets to Creating Lasting Value (John Wiley & Sons, 2003).

At firms like Enron and WorldCom, chasing short-term gains has tempted some top managers to enhance their personal wealth, leaving their companies and shareholders vulnerable to scandals. Just as dangerous, such misplaced focus can distract managers from the company's strategic and operational needs and ultimately shortchange shareholders, employees, customers and other constituents.

"Contrary to what the advocates of maximizing short-term shareholder value would have us believe," Bill George contends, "the best-kept secret in business is that mission-driven companies create far more shareholder value than do financially driven firms." He's exactly right.

George goes on to say that a company's mission must be supported by a strong culture of values that extends beyond its four walls and radiates outside the company-with customers, suppliers and the community. The combination of a clear mission and strong values is what ultimately drives the company's long-term performance.

Of course, this message is nothing new. Tom Peters, Peter Drucker and other management gurus have espoused this theme for decades. But business leaders, at public and private companies alike, have forgotten. They were too busy salivating over the stock-market bubble and stock-option packages during the 1990s. Even family shareholders caught the bug, nagging management about when their shares would show that kind of appreciation and opportunities for liquidity.

What's the solution? "The only way to deal with shareholders," Bill George contends, "is to manage them and not let them manage you."

But how, specifically, can a family CEO manage shareholders? With mission, values and performance goals that everyone can adhere to. By veering away from chasing short-term gains and, instead, getting back on the track of long-term, sustainable growth.

Family firms are the perfect audience for Bill George's message. They're close to the entrepreneurial mission of their founders. With a family company, you don't have to create a whole "mission mindset"; the message simply draws family and employees back to their roots.

The door to long-term, sustainable, profitable growth hinges on three variables:

1. A strong family organizational structure, such as a family office, family council or holding company, to be the steward of family values. With this in place, the shareholders will still enjoy a wide variety of opinions and liquidity needs, but they'll no longer distract management with their demands. The family organizational structure will be the focal point of discussions on family mission, family values and wealth-related concerns, such as liquidity and diversification.

2. Strong and effective programs for the liquidity needs of shareholders. Ongoing liquidity programs, developed by the family-structure organization (described above), should include mechanisms for shareholders who want to cash out, for whatever reason. That will release significant pent-up pressure in the family and the business.

In addition to continuing liquidity programs, the business should plan and provide for capital needs resulting from significant liquidity events for family shareholders like weddings, births and college tuitions. That enables managers to pursue long-term strategies without intermittent interruptions by sudden large capital demands for shareholder liquidity. For instance, one of my family business clients formally polls shareholders each year about their expected forthcoming liquidity needs.

3. A strong financial structure with ample resources to allow capital to grow, and to plan the future exit of capital sources, whether in the family or outside. The family must be open to ideas that may involve outside capital to give management the means to pursue growth.

So how did Burke Engineering's managers regain the upper hand over their shareholders? Basically, some fourth-generation leaders convinced the rest of the family of the need to create a strong governance structure. They created a family council, which explored shareholders' diverse needs and expectations, educated the family about realistic financial options, and created liquidity programs based on their needs and the company's financial resources.

In the process, family council meetings recognized that not all shareholders bought into those values. To prevent different groups of shareholders from further pulling managers in different directions, the council ultimately decided to hook up with an outside partner to jointly acquire a competitor.

This acquisition would, over time, create enough value to help finance the exit of the restless shareholders and enable the rest of the family to rally around a unified message to management: Pursue your mission as a company and focus your attention on sustainable, profitable growth.

Now Burke's managers can do their job again. They're no longer pressured to pursue shareholder value for its own sake. The newly liberated management began looking at new growth opportunities-including an acquisition, which they just completed-to provide the capital for both future liquidity needs and future growth opportunities. Two years later, the value of the company has more than tripled.

Even Wall Street analysts seem to be heeding the wisdom of focusing on sustainable, profitable growth, instead of chasing quarter-to-quarter paper gains. The analyst reports that cross my desk seem to base their buy, sell or hold recommendations less on the latest financial maneuvers that inflate shareholder value, and more on whether companies are pursuing sound strategies that will enhance long-term growth.

Family business owners would be wise to do the same.