Strategic Planning in the Family Business

By John A. Haas
Management Strategies Group

We know that a low percentage of family-run businesses "make it" to the second generation (about 35%), and even lower percentage (< 20%) survive to the third. While there are many business and family relationship reasons behind these data, good planning can certainly help raise the odds for successful succession.

Family Strategic Planning

Assuming the desire to retain family ownership, the enlightened family leader will assure that a family strategic plan is developed, and will consider succession well before it becomes necessary.

This is often best achieved at a family business retreat, held outside normal business hours, with both active and relevant inactive family members attending. It often involves difficult conversations due to multiple agendas and goals among family members. Outcomes could include:

  • A statement of family values (relative importance of business and family)
  • Personal and professional goals of family members, including interest in active management
  • An articulated and agreed vision for the family and business
  • Decisions about how to handle compensation, benefits and performance evaluation
  • Identifying potential successors and structuring individual development plans for each
  • Documenting your intentions regarding ownership and succession in an estate plan
  • Preparing a letter of instructions about immediate transition "if I'm hit by a bus."

Business Strategic Planning

This involves analyzing the business in its current and projected environment. Elements include:

  • Assessing internal operations and external (e.g. technology, economy) forces that affect the business
  • Analyzing the current strengths and weaknesses of the organization structure, culture and available resources (financial, human and technical).
  • Listing opportunities (growth, new markets, new products, changes in regulations) and threats (competition, shortage of raw materials, price cutting) to the business
  • With both family and other key managers, articulating the business mission, long-term objectives, strategies for getting there and action steps to implement the strategy, including budgets and accountability assignments.
  • Structuring and staffing the organization with an appropriate mix of managers with outside experience (who can both lead and mentor) and possible successor family members.

The key to successfully developing, implementing and monitoring family and business plans is open and frequent communication within both the family and business systems.

Some of these ideas are further developed, and many other useful resources are available at: mysmallbizportal.com.

Winter 2003 -Volume 13, Number 1

 

 

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