For short-term gains and long-term sustainability, family businesses need clarity of vision, mission, and values. It starts with asking the right questions.
At least half of all companies in the U.S. are family businesses, and family enterprises are the most common form of business entity in the world.
Yet, their ownership, management, and family composition create a unique type of business that requires special knowledge and skills in order to effectively grow. Planning is important for all businesses, but it’s even more so for family businesses because personal relationships are at stake.
I grew up in a large family with six siblings, and the most enduring lesson my dad taught us was, “If you never have anyone else in this world, you have your family.” To this day we are a close knit family, though we have typical large family dynamics. As one of my brothers likes to joke, “We put the fun in dysfunctional.”
This value of ‘family first’ has endured for me, and has been my inspiration for seeing family businesses grow and thrive. My mission is “to be a catalyst for the prosperity and success of privately held and family businesses,” and I have had the privilege to consult with many truly inspiring families over the 23 years that I have owned my company.
The Importance of Planning
My experience working with family businesses has shown me that for many owners, it is the sense of connection and identity with family that drives their motivation for growth and prosperity. This can be an advantage when it comes to planning, since family businesses often have a long-term strategic outlook due to their owner’s motivation to create a legacy for generations to come.
However, many family businesses lack the formal planning processes that other companies may embrace. They often assume the comfortable and personal nature of the family relationships enables them to ‘figure it out as they go.’
In reality, planning is even more important in family businesses because personal relationships are involved. Many disagreements in family businesses arise from a lack of clarity between family members due to poor communication or misalignment of expectations. This can become especially pronounced when there are multiple generations and each has a different idea of what they’re building or the best way to get there.
One of the biggest challenges many business owners experience when they embark upon the planning process is a feeling of being overwhelmed and intimidated. Creating a plan feels a bit like writing a term paper in school. How many of us enjoyed that process?
A point of confusion is often the complete lack of consistency in how planning terms are used. One business book describes something as ‘vision,’ but it sounds strangely like what another author or consultant calls ‘mission.’
With planning, the process can be simplified into three steps; Creating Clarity, Focusing Behaviors and Measuring Results.
Creating Clarity: Three Questions to Get Started
Clarity feels good—it’s light, clear and focused. It serves the very important purpose of providing all family members a mental picture of where they’re leading the organization. Painting that clear picture is important to non-family members too as it keeps them engaged and demonstrates that the business’ future plans are not a ‘family secret.’
Studies have found that the number one motivator for employees is feeling involved and engaged in the business, yet most leaders assume that everyone knows what’s happening. In reality, most employees say they feel ’left in the dark,’ so clearly identifying and communicating future plans improves engagement throughout the organization.
I’ve found the planning becomes much less intimidating when you approach it as a series of questions. We all like good, provocative questions—they get us thinking which is fun and helpful. Creating clarity comes from answering the three questions:
Why does this company exist?
What are our core values?
What are we building?
The first question is all about getting clear on your ‘why.’ Simon Sinek does a great job of laying this out in his revered TED Talk: “How Great Leaders Inspire Action.” In his talk, Simon delves into what he says is a naturally occurring pattern, grounded in the biology of human decision-making, that explains why we are inspired by some people, leaders, messages and organizations over others.
To identify your ‘why,’ consider your response to the following questions; “what’s your purpose, what’s your cause, what’s your belief, and why does your organization exist?”
After answering the question: ‘why does this business exist,’ family members need to identify the values that tie the ‘why,’ and the family, together. The values in a family business are especially critical as they marry the values of the family and the business.
The link to values is part of what can make a family business culture so rich. Ultimately, a business’s success should be evaluated not just by what is being accomplished, but by how it’s operating according to the values that have been established.
The third question that needs to be answered is ‘what are we building?’
In other words, if we had a crystal ball and could see three to five years into the future, how would the business look?
What qualities would the business have in terms of size, geographic scope, and/or number of employees? What new markets or products offerings would be in the picture?
Many business owners have a clear picture of their preferred future—they don’t need a long drawn out planning exercise to figure it out. Unfortunately, most of the time that vision isn’t written down. It’s dangerous to assume everyone in the company knows what they’re working towards.
Growing Your Vision
Business planning doesn’t need to be overwhelming or complicated, and it’s critical to the success of any business. A university study revealed that you are twice as likely to grow your business or acquire funding if you have taken the time to write a business plan.
Creating a plan is even more critical to the future of family businesses considering that 30% of all family owned businesses continue into the second generation, twelve percent are viable into the third generation, and just 3% survive to the fourth-generation level and beyond.
Having a clear focus on the future and a shared understanding of core values helps keep everyone in the company focused and provides clarity. Creating a plan for the future helps to guide decision making in the present, and perhaps more importantly provides an opportunity for family members to maintain positive, lasting and productive relationships.
This is the first article in a three-part series. View the second post: Close to Home: Focusing Behaviors for Family Business Planning and Protection and the third article: Close to Home: The Measurement Imperative in Family Business Planning.