Small Business: Balancing Family and Business Goals

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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:

What are the long-term personal and professional goals of family members?
What is the family mission? Why are you committed to establishing and operating the business?
How do you envision the firm in the future?
Will family members be active in management or will they be passive members?
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 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

developing a mission statement,
setting objectives,
developing strategies to meet objectives, and
developing action steps to implement the strategy.

Mission Statement

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

include specifications that allow measurement,
establish the individuality of the firm,
define the business in which the firm wants to be involved,
are relevant to all with a stake in the firm, and
are exciting and inspiring.

Objectives

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:

revenue growth,
earnings growth,
sales and market share growth,
new plants or stores, and
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:

Stability--success is derived from little change (rare).
Profit strategy--sacrifice future growth for profits today.
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.

Family Strategic Planning

The entire family should develop a mission statement or creed that defines why it is committed to the business. By sharing priorities, strengths and weaknesses, and the contribution each member can make to the business, the family will begin to create a unified vision of the firm. This vision will include personal goals and career objectives.

An important issue to consider is how to set priorities for the family and the business, i.e., decide which will come first, the family or the business. How you answer this question will influence your planning. Some family members will opt for the business first, reasoning that, without a business, there will be no financial security for the family. Others will opt for the family first, reasoning that no business is worth the loss of family harmony. A third alternative is to serve both family and business perhaps not equally, but as fairly as possible. Under this alternative, all decisions are made to satisfy both family and business objectives. For example, a family may have a policy that any family member may join the business, but he or she must meet the requirements of the job. You may find this is the best alternative because it forces a commitment to both the family and the business.

The Family Retreat

Trying to plan a business strategy during normal office hours is almost impossible. Plan a family business retreat to discuss the goals of the individual family members and the goals of the business. The first retreat should focus on reviewing the firm's history, defining family and business values and missions, creating a statement about the future of the business and reviewing areas that need more attention.

The purpose of the retreat is to provide a forum for introspection, problem solving and policy making. For some participants this will be their first opportunity to talk about their concerns in a nonconfrontational atmosphere. It is also a time to celebrate the family and enhance its inner strength.

A retreat usually lasts two days and is held far enough away so you won't be disturbed or tempted to go to the office. Every member of the family, including in-laws, should be invited. Begin planning your retreat about six weeks in advance.

Once you have picked a time and place, establish a tentative agenda. Your actual agenda will be tailored to meet the unique needs of your family and business. Usually families will identify some of the following issues for discussion at their first retreat:

A family creed or mission statement.
Management succession.
Estate planning.
Strategic business planning.
The reward system.
Performance evaluation.
Communication within the family.
Preparing adult children to enter the business.
Transition timing.
Exit and entry policies.

You may consider using a retreat facilitator, a professional experienced in helping family-owned businesses. The facilitator helps identify issues for discussion before the retreat and keeps the atmosphere nonconfrontational during the retreat. The facilitator does not solve the family's problems but guides the family in doing so.

The retreat is the beginning of a process. When a consensus is reached by the participants, policies should be set, courses of action planned and responsibility for implementation assigned. When agreement cannot be reached, further discussions should be planned, possibly with the continued assistance of the facilitator.

One important outcome of the retreat should be plans for periodic family meetings and retreats in the future, so the dialogue will continue. Open communications will enable the family to come to grips with problems and issues while they are fairly easy to solve. Once family members have reached a consensus on the continuity of the firm and their roles in it, you can begin planning for succession.

Food For Thought
You cannot truly have something new without letting go of the old. A new job requires you to resign from your old one. A new house means that you must move out of your old one. A new version of your word processing software creates files that can't be opened by the old version.

The easy, comfortable way is to stay with what we know. But with the world changing so rapidly, staying put is a luxury that few can afford. Life is an exciting journey, and to execute a journey, one must travel to new places.

If you are not moving forward, you are falling behind. What new things can you learn today? How can you improve the way you do your work? How can you do things faster, with more accuracy, and at less cost? All over the world, people are asking themselves these questions, and many are discovering the answers.

To embrace the new, you must "lose sight of the shore." That means opening your mind, and losing your attachment to the old way of doing things. Don't take comfort in your routine. Instead, have confidence in your ability to adapt to, and take advantage of, new concepts and ideas.

True, meaningful commitment to anything is not something that happens just once. It happens over and over again. You will constantly be called upon to choose one action over another, and each time you do so, you will be renewing your commitment.
When you are fully committed to achieving your dream, many opportunities will come, as if by magic. And so will obstacles. The opportunities are great. And the obstacles are just as important. They will help you to become the person you need to be, to achieve your dream. You must grow. You must get out of your comfort zone. The obstacles and challenges give you a way to do that.

Learn to appreciate the obstacles for what they are -- opportunity in disguise. They will teach you, prepare you and help you to grow.

The interesting thing about fear is that it should not be feared. Fear can be a very useful and powerful tool. It gives us extra energy in new and unfamiliar situations. It sharpens our senses. It helps us to focus. It helps us to avoid legitimately dangerous situations.
The problem with fear comes when we begin to fear being afraid. Fear of fear. For example, imagine that your have "stage fright" -- the fear of speaking in front of a large audience. This is probably one of the most common fears. Now suppose you find yourself in front of a large audience, and suddenly a fear overcomes you. What is that fear? Are you afraid of the audience? No, you're afraid of your fear. Carry it a step further. Imagine that you turn down a good job offer because it might involve some public speaking. Do you fear the job? No. Do you fear the public speaking. No. You fear the fear of the fear. Wow -- fear can get very deep when we're afraid of it.

The best way to overcome fear is to do the thing you fear. And the best way to do that is to accept your fear as something positive and useful. Use the heightened energy and awareness your fear gives you to help you through the feared situation. That's what the fear is there for -- to help you cope with the thing you fear. Don't fear your fear. Use it for growth and accomplishment.