Why is it that so few family businesses make it into future generations? Lack of strategic planning.
These are some random takeaways from our personal experience in putting together a strategic plan for our family business. It isn’t meant to be a comprehensive guide (this topic is well covered elsewhere) but rather about the issues that a family business experiences when creating a strategic plan for the first time.
Strategic Planning Obstacles in a Family Business
- Keeping strategy and financials close to the vest
- Thinking strategy is more spontaneous because we don’t need to run it by others
- Lack of trust in outsiders becoming involved in decision-making
- Lack of comfort delegating to others for implementing strategy
- Difficulty accepting advice from others
Formalize the Strategy
- The senior generation needs to get the strategy from their head down into words in a shareable format.
- Create and grow the family and business visions together.
- Hold family meetings to discuss:
- Family members' personal plans and goals
- Family members' involvement in the ongoing business
- Future direction of the business
- Lifestyle or professionally managed business
- Financing the growth strategy (from within or outside equity)
- Hiring/role of non-family executives
We tried meeting at an off-site location but later found it more productive to meet at our business in the off-hours. The off-site location felt too formal and forced.
Sharing strategy often involves disclosing financials for the first time.
We had a difference of opinion on how fast the business should grow, because it brought up issues including outside equity, loss of control, and non-family management. We reached consensus after researching and hearing from others outside the family.
Share the Strategy
- Begin sharing the strategy with other family members.
- Engage non-family management in the process.
- Create a working strategic plan document in a format more like an action plan than a plan that sits on the shelf.
Sharing strategy often involves disclosing financials for the first time, which can be sensitive to business owners. Start by using financial highlights and gradually add detail as you feel more comfortable.
Execute the Strategy
- Form an advisory board to validate ideas and provide objective outside feedback on your strategy.
- Break the strategy down into smaller initiatives.
- Form small committees to execute the strategy.
- Designate leaders to champion each of the major initiatives.
- Update the working plan on a regular basis to keep it relevant.
As entrepreneurs we’re used to doing things ourselves. It can be difficult the first time to involve others in the process. We sometimes feel we have failed if we ask others to help.
Tread carefully when it comes to forming committees. Resist adding layers of decision-making where decisions get bogged down in the process.
- The challenge is to keep the business agile and responsive while executing strategy faster by involving more in the implementation.
- Resist making the process too formal. Keeping it as an ongoing action plan helps to make it more of a routine rather than a one-time event.
- Anticipating rather than reacting to changes in your business is critical. Don’t let the business run you instead of you running the business.
Reprinted with permission from the Northeastern University Center for Family Business