Keeping the Family Business Healthy: How to Plan for Continued Growth, Profitability, and Family Leadership. Strategic planning for family business: parallel planning for the merger of family and business / Randel S.
List of Tables
Preface
13 years ago, the idea of joining the family business was not always the first priority of the next generation. Since then, the value of a family business career has improved – for two very important reasons. We are now seeing a younger generation that has a stronger interest in the family business because it is something that is uniquely theirs to build.
Parallel Planning Process (OPP): In more detail, OPP integrates planning with the needs and expectations of the family and business systems. Family Enterprise Continuity Plan: This aspect of the PPP is a regular review of the family's values, talents and commitment to the business. The expansion of the family's stakeholder group and the increasing number of non-occupational roles require recognition of this new reality.
Acknowledgments
1 The Importance of Planning for Business Families
Developing a continuity plan for family businesses ensures that the interests of the family are taken into account together with those of the business. Families that align family and business systems create a positive environment where the family thrives and the business performs. The Family Enterprise Continuity Plan looks at family participation (Chapter 4), management and leadership development (Chapter 5) and ownership (Chapter 6).
They also saw the business as a way to perpetuate the family tradition and business legacy. In reality, it might not be best for a family business to continue in the family. It is a way to learn and think about possibilities for both the family and the business system.
2 The Parallel Planning Process
Parallel planning for family and business systems poses a special challenge for the family business. The Reardon family demonstrates the need to develop a shared vision for the future of the family and the company. Bean demonstrates the power of family core values in driving both family and business planning.
Achieving a unity of purpose, based on family values, serves both the family and the business. For each of the topics, the Family Business Philosophy defines a relationship between the family and their business. Becoming a learning family and a learning business is essential to the long-term success of the family business.
3 Securing Family Commitment
Family members who choose not to commit to the family business may feel like they are losing their family ties. IDENTIFYING A FAMILY BUSINESS PHILOSOPHY An agreement on a Family Business Philosophy is closely linked to the core values of the family. Only a good compromise will bring family involvement and support for the business.
William Ford earned his way to the presidency through a strong commitment to the family business. Family and business circumstances will influence the debate: the nature of the family, the nature of the business and the core values of the family. The family's organizational philosophy should be reexamined as part of the annual planning process.
Changes in the family or company can lead to a change in the original family principles. Discussing the family's vision of itself is the final activity in exploring the development of family commitment. The philosophy of the family business and the core values shape the development of the family vision.
This draft - one sentence to a paragraph - explains the family's expectations of and obligations to the business. This statement of commitment clearly articulates the family's contributions to the business and their expectations for themselves. The next chapter addresses family participation, the first component of the Family Enterprise Continuity Plan.
The concept of family participation involves the active involvement of the family in the business based on a shared decision-making process.
4 Encouraging Family Participation
The first dimension of participation is to get more family members involved to contribute to the future of the family business. The second dimension of participation is the expansion of the family's role in the decision-making process. As families grow and mature through the life cycle, the family's relationship to the business weakens.
Family participation in the planning and decision-making process improves support and personal ownership for final actions. At this stage of family development, the topics are education and values, not formal planning. As the five steps indicate, the main purpose of the family meeting is professionalism and participation.
Both the family and the business benefit from the input of non-family managers in the family meeting. This is an opportunity to help non-family managers develop a better understanding of family commitment to the business. Family meetings should identify issues and topics related to family and business that require formal processes or understandings.
The personal behavior of family members is an important issue as it can have serious legal and PR consequences for the company. What can the family do to involve non-working family members in the family business? This topic forms an important link between the Continuity Plan for Family Businesses and the Business Strategy Plan.
This link exists because the development of the family's talent is central to both plans.
5 Preparing the Next Generation of Family
It is important to understand the implications of the family life cycle on family careers for two reasons. CEOs coming into family firms must also deal with the influence of family on their role. Career opportunities for the next generation of the family are an important issue for the Reardon family.
In many families, the CEO of the company also acts as the chief judge of the family. Teaching and modeling positive attributes will improve the natural fit between the family and the business. However, this is no guarantee that the next generation will actually enter a career in the family business.
Clarify family agreements about career opportunities early, before any of the next generation is ready to enter the family business. Professional experience outside the family business has advantages for both the company and the individual. It is also not important whether the job is in the same industry as the family business or not.
Delaying joining the family business to get your degree isn't a bad idea either. How does my self-evaluation compare to the evaluations of others in the family business? Credibility: Respect from family and company based on achievements, work performance and personal style.
Encourage exploration of family and business history and an understanding of business culture.
6 Developing Effective Ownership
As the family matures and the ownership group changes, three ownership forces influence the characteristics of the ownership group. At best, this is difficult because of the hierarchies of the family and business structure. How does the family balance the capital needs of the business with the liquidity needs of the family?
Ownership education should be designed to stimulate basic business thinking and provide an understanding of the family business and the way it functions. It reflects the family's values and creates more shareholder involvement than any other factor. Family ownership continuity is based on many of the concepts discussed in this chapter.
In the family business context, management takes on a dual importance, requiring management structures for both the business and family. Third and equally important, they form the ownership structure to support the family's vision of the business and itself. The internal market can be created in several ways, depending on the complexity of the family business.
As a family business grows, there may be different branches of the family that want to maintain ownership of their branch. This may include distributing some of the parents' assets to children who have chosen not to participate in the family business. 15. In addition to the formal management role, the board of directors can also support the family's relationship with the company.
These family procedures become the basis for effectively directing the actions of the family and its relationship with the business.
7 Assessing the Firm’s Strategic Potential
The firm's internal capabilities are the resources that management uses to develop the business strategy plan. It is essential to develop agreement among the management team regarding the current status of the firm as a starting point. Developing an accurate picture of the firm's potential requires a thorough assessment of its internal and external situations.
The internal assessment examines the firm's capabilities (strengths and weaknesses) related to assets, resources, technologies and skills. It is valuable to try to achieve a management consensus on where the firm's internal analysis places the firm on the vertical axis of the Strategic Potential Matrix. The discussion of the firm's internal situation begins by examining financial performance and financial structure.
The firm's financial strength tells a lot about the effectiveness of the current plans and is a critical factor in assessing its Strategic Potential. Monitoring and evaluating the firm's current performance is an important first step in the internal analysis. The internal analysis of the firm's financial position may reveal weaknesses in the company's profitability or investment of cash flow.
The firm's organizational competence is the final factor in assessing the firm's internal capabilities. Possible factors in the general environment that can influence the company's strategy are shown in Table 7.4. The internal and external assessment helps management to develop a shared understanding of the firm's Strategic Potential.
A decision-making matrix is presented that relates the family's reinvestment to family commitment and the firm's strategic potential.
8 Exploring Possible Business Strategies
Before discussing specific strategic alternatives, it is necessary to be aware of the limitations that the company's strategic potential places on strategy development. The purpose of discussing strategic priorities is to ensure that the organization's strategic thinking makes sense given the company's position. This can be a difficult process, as different generations of the family often have very different assessments of the current state of the business and its future potential.
In simple terms they represent capitalizing on existing strategy (revamp), improving strategy (reform) or dramatically changing strategy (regenerate). A moderately strong firm in a moderately attractive market suggests a reformulation strategy to move it into stronger business and competitive positions. A weak firm in an unattractive market requires a regeneration strategy or will eventually go out of business.
