Most family businesses are the byproduct of exceptional insight, hard work, motivation to succeed, and/or just plain good luck from one or more family members. Due to the many current challenges of starting a new business, such as working capital, taxation and regulation, these businesses are deemed valuable. Most successful, capital intensive family businesses originated from either grandparents or parents with second or third generation family members striving to carry forward the business. The competitive nature of contemporary business demands that these family members and managers apply the vast majority of their time, if not all of their mental energy, to the current day-to-day challenges of success and survival. It is difficult to apply quality time towards the effective futuring of their businesses. As a result, long term business goals, operating methodology, talent recruitment, effective business structuring and effective communication suffer. The average family owned business experiences substantial losses of profits, productive energy and harmony due to ineffective preparation for the inevitable changes and challenges of business continuity.
Everyone understands the cliche´, "If you fail to plan, you plan to fail." In light of this, why do so many family owned businesses neglect to address the long term elements that will dramatically influence the profitability and even the succession of their business? The answer is a lack of appreciation for the importance of long term planning regarding business profitability, business continuity and succession. The natural result is an unwillingness to divert energy and resources from short term profitability consideration and to effectively address long term family and business issues.
Family business strategic planning is critically important to success and succession. Long term strategic planning issues vary with each business and family, but commonly include issues and questions such as:
Is there a clear vision for the future of the business?
Does this vision represent reasonable input from all the stockholders?
Are operating goals recorded, reviewed and refined?
Are there clearly defined business strategies for achieving goals?
Are there sufficient resources to implement business strategies? (i.e., time, money, skills and competencies of people in the organization)
Is there an accountability program for the implementation of these strategies?
Have the potential obstacles to the achievement of goals been identified?
Have backup strategies been identified in the event that obstacles and difficulties require changing plans?
Is there a clear definition, understanding and acceptance of the leadership structure?
Is there an understanding of the various talents, skill sets, etc. of family members and how those assets can be best positioned in the business?
Do team members understand and accept their roles?
Is there an effective review and accountability of leadership?
Have the "Critical Factors for Success" been identified in all areas of the business?
Is there a "Performance Management Process" in place to reward and enhance performance?
Is there a planned periodic review and refinement of strategic planning?
It is a given that your business will encounter serious challenges. Change will be your major obstacle. The certainty of the future is uncertainty. The only aspect of the business environment that will not change is the presence of change, and lots of it. How you deal with the challenge of change is a function of the business paradigm. It is natural for business ownership to represent several different and even diverse perspectives. The greatest threats to the family business unit are disunity and inflexibility.
Succession planning is fundamentally a long term strategic issue. Undertaking strategic planning reflects that a family understands the nature of future challenges and desires to responsibly address how they will deal with those challenges. Expending the time and resources for strategic planning indicates that families understand that with unity of purpose they can overcome any business challenge.
The first step in strategic planning is recognizing that it is necessary to future your business. Strategic planning is not a casual exercise. This endeavor is a challenge in itself. Furthermore, the strategic planning process will uncover unanswered (or avoided) questions that will challenge participants. Strategic planning requires a commitment to long term success.
The second step to family business strategic planning is the selection of an experienced facilitator. The facilitator's role is to effectively prepare the participants for the planning process, lead a two-day planning session and prepare written records and conclusions regarding the byproducts of the strategic planning discussions. The conclusions of the facilitator will lead to full discussions of pertinent issues which include business vision, strategy and specific implementation plans.
The third step to family business strategic planning is data gathering to evaluate and clarify existing objectives and agenda. The success of any strategic planning endeavor is directly dependent upon the preparation. The education, experience and organizational skills of the facilitator are critical to the success of this planning effort. Pre-assessment interaction with the family principals and key management assist in identifying issues that are important to the long range success and succession of the business, as well as the unity of the family. The comprehensiveness of the pre-assessment evaluation in large part will determine the quality of the overall strategic planning outcome.
The fourth step is organization, production and participation in the core strategic planning sessions. This is usually a two-day event followed by shorter meetings to refine conclusions and establish specific directions for future action. Depending upon the number of issues and the number of the participants, the strategic planning process may require two, three or even four separate meetings. The only reasonable approach is a commitment to work at this process until a satisfactory strategic plan has been established.
The final step in the strategic planning process is review and refinement. Unfortunately, strategic planning does not develop absolute decisions that can withstand the many influences of business, family and federal regulation. As a result, the family business council should reconvene to address strategic planning issues on an as-needed basis.
Loyd H. Rawls, is President of The Rawls Company in Orlando, Florida, and has specialized in family estate and succession planning for closely-held, family owned automobile dealerships since 1973. If you have specific questions or require more information about this subject, please check the appropriate box on the reader response form on page 3.