Balancing Family and Business
Goals
When conflict occurs in the family business, it can be traced to a
disparity in the goals of the individuals, the family or the business.
Perhaps a family member
works in the business out of economic necessity, not because he or she wants
to. Or perhaps the potential successor has plans for the business that differ
from current management plans--different generations usually have different
goals. Whatever the cause, the conflict must be addressed and resolved to avoid
and prevent more serious problems later.
One way to define and
align family and business goals is through business
and family strategic planning. In these plans, you will create a mission
statement for the business and for the family that allows each element to
complement the other. Once you have completed this task, set goals for the
family business that will allow the family and business to prosper. Next,
develop a strategy to accomplish these goals and, finally, formulate policies
and procedures that control the family's involvement in the business.
Business Strategic Planning
Strategic planning for
family-owned businesses requires that you integrate family issues, such as:
q
What are the long-term personal and professional goals
of family members?
q
What is the family mission?
q
Why are you committed to establishing and operating the
business?
q
How do you envision the firm in the future?
q
Will family members be active in management or will they
be passive members?
q
How will issues such as compensation, benefits and
performance evaluation be handled?
The answers to these
questions will affect the business strategy and should be resolved before
strategic planning begins.
Strategic planning involves
analyzing the business in its environment and devising a process for guiding
its development and success in the future. This process involves assessing the
internal operations and the current external environment (i.e., economic,
technological, social and political forces) that affect the business. To begin
this process, identify internal strengths and weaknesses that may constrain or
support a strategy. Components of this assessment include (1) the
organizational structure, (2) the culture and (3) the resources. Make a list of
the opportunities available (growth, new markets, a change in regulations) and
the threats (increased competition, shortage of raw materials, price-cutting)
to your business. This should give you some insight into the current situation
and provide a strategic direction.
Next, list the objectives
of you and your family, identifying personal needs and risk orientation. Many
of these objectives and goals (See Appendix for Forms) will be addressed in your family strategic plan. Also,
you will find that your personal objectives will affect the strategy you
choose. For example, if there is a great opportunity for growth in your market
but you have a low risk orientation and a high personal need for security, you
probably should not pursue high growth. It would be not only risky but also
expensive. Growth consumes cash, and cash must be generated internally or
financed externally. Your personal objectives should mesh with your strategy.
Once you have identified
opportunities in the industry, assessed the strengths and weaknesses of the
firm and listed your personal objectives, you can proceed with the strategic
plan. This will involve:
ü developing a mission
statement,
ü setting objectives,
ü developing strategies to
meet objectives, and
ü developing action steps to
implement the strategy.
Mission Statement
(See Appendix for Form)
The mission statement answers
the question "What business are you in?" It defines your customers
and explains why you are in business. The mission statement embodies the heart
of the business and gives direction to every facet of the business. Effective
mission statements
q
include specifications that allow measurement,
q
establish the individuality of the firm,
q
define the business in which the firm wants to be
involved,
q
are relevant to all with a stake in the firm, and
q
are exciting and inspiring.
Objectives and Goals
(See Appendix for Form)
You should set reasonable
objectives for the firm, based on the mission statement, to ensure
accomplishment of the firm's mission. Objectives should be clearly stated,
realistic, measurable, time specific and challenging. Objectives can be created
for:
q
revenue growth,
q
earnings growth,
q
sales and market share growth,
q
new plants or stores, and
q
product/service quality or corporate image.
Strategies
Strategies are determined
by your answer to the earlier question: "What will the firm be like in the
future?" Your strategic options include the following:
1. Stability--success is derived from little change
(rare).
2. Profit strategy--sacrifice future growth for profits today.
3. Growth strategy--growth may be achieved through vertical
integration (expansion from within), horizontal integration (buy a competitor),
diversification, merger or retrenchment (turnaround or divestment).
Action Steps
Once the strategy is
selected, action steps should be specified that will guide the firm's daily
activities. An example of an action step is creating a budget to project the
costs of a strategy. This process also is known as tactical planning. The steps
in tactical planning should be practical and easy to implement and account for;
their purpose is to convert goals into manageable, realistic steps that can be
individually implemented.
Eric
Eric W. Leaman
Trustee
Organization for Entrepreneurial Development
Unleashing the entrepreneurial spirit.
Change your mind ... and EVERYTHING changes
