Family Planning??
By
Have you
ever thought of how to create a strategic plan for a family-owned
business? When you consider family
business planning as being limited to a business plan, there isn't much
difference family and non-family companies.
A business plan is one of the methods used to document a company's
strategic plan, and normally defines:
·
Why
is the company is in business (their mission)?
·
Where
is the business located and how is the product or service produced and
distributed to customers?
·
Factors
in the marketplace that could have negative impacts on the success of the
business; and the strategies necessary to overcome those impacts.
·
Qualifications
of the management team that will implement the strategy.
·
And,
a financial projection that will define the goals, objectives, and operating
results of the strategy.
In a
family business, however, the strategic planning process should also encompass
all aspects of the family's involvement in the company. Normally, the family members participate in
operations; are part of the management team; are members of the board of
directors; and are stockholders.
Roles are
not clearly defined and family members perform any and all activities necessary
for the success of the business. Job
functions that are usually separate may be combined or blended. When decisions are needed, the member makes a
decision based on the problem and not based on the discrete nature of each of
the roles he may be responsible for.
A
complete strategic plan for a family business should provide for a business
plan to cover the operations and goals of the business, and a succession plan
to cover the ultimate, unavoidable transition in management, control and
ownership of the business.
That
doesn't sound so difficult, does it?
Then why isn't it done more often?
From my
observations of family businesses, it is rare to encounter one that has a
formalized business plan. When I do run
into one, it is generally due to a bank requirement for financing.
Reactive
planning is the most common planning mechanism.
Reactive planners take no action until an event occurs that makes them
spring into action. It is not unusual
for the event to be a phone call. By the
way, reactive planning is not limited to family businesses; it is a technique
encountered frequently in many types of organizations.
Businesses
fall into reactive planning during their formative stages when survival can be
a daily issue. Once into this form of
planning, it is a hard habit to break.
Awareness of the benefits and logic of strategic planning provides a
tremendous incentive for changing planning methods.
Finding a
company that has a transition plan for management and ownership is even rarer
than finding a business plan. In the
minds of the family, there are many obstacles to the transition process. In statements made at my succession planning
seminars and in work with my clients, the obstacles can be generalized as: Fear of the Unknown, Emotional Reaction from
the Family, and Expense.
These
obstacles are real and, because many of them have strong emotional overtones,
indecision and inaction are the usual response.
It may be hard to face these issues, but there are answers and methods
to solve these very real problems.
So how do
you get a plan created for your family business? Here are some suggestions to get you started:
1. This may seem an obvious first
step, but you must make a commitment to see the planning process through to a
successful conclusion. If done properly,
the process may take six to twelve months to complete. This is elapsed time, not continuous
involvement on a daily basis.
2. Evaluate your abilities to lead
the process and cope with the inevitable emotional tensions. Many companies have discovered the value of
bringing in an outside facilitator to lead the process. Experience with other family businesses and
objective, independent viewpoints can provide direction to the many difficult
issues. The cost is insignificant when
compared to the future expenses associated with an unplanned transition.
3. Segregate and clarify each of the
roles performed by the family.
4. For each role define a vision of
the family involvement in each role.
5. Create an action plan to allow for
an orderly transition to achieve the vision.
There are basically three events
that trigger family business transition:
·
Death,
·
Involuntary
bailouts, such as bankruptcy or divorce,
·
Voluntary
bailouts, such as sale or gifts.
You can't
avoid the inevitable family business transition. Part of your leadership and legacy is to
properly plan for the voluntary bailout, which is the only event that is truly
under your control.