Co-authored with Margaret Wilson of Tandem Partners
Part 1 of our series on integrated planning for family-owned businesses explored the unique challenges they face and why they require a different approach to planning. Part 2 delved into the concept of balancing family continuity goals and business needs – focusing on the interdependence of the family system and the business system, and how any action or decision in one affects the other. Part 3 shifted from theory to practice with the four components necessary to keep your family business on course toward strategic goals.
In this final installment, we answer the most common questions we hear from clients as we’re guiding them through an integrated planning process as a way to help you put your family and business on the path to long-term success.
The process for creating the vision and values for your family business should be fun and inclusive. So, it’s important to involve everyone in the process, from founders to the youngest generation. This ensures the vision and values represent the collective aspirations of the family.
Begin by gathering family members for a series of formal conversations during which each individual shares their thoughts on what the family stands for and believes in, how people should be treated and what they want to be doing more of as a family.
The process should be both reflective and forward-looking, with family members encouraged to think about the future and how to align the business with the family’s evolving priorities.
Once you’ve collected everyone’s ideas, work together to refine them into a clear and concise vision statement and a set of core values.
Think of vision and values as a living document; to be revisited as the business and your family grows.
When a business is led by the founder, they typically make decisions independently, guided by trusted advisors. But as the business transitions to the next generation, establishing a more formal governance structure becomes paramount.
Family Council
Forming a Family Council is an effective initial approach as it provides a platform for family members to engage in discussions, make collective decisions and ensure that family values are integrated into business operations.
Board of Directors
As the business grows and ownership becomes more complex, most family businesses add a Board of Directors. This structure aligns the business with its long-term vision and strategy, with the board ensuring decisions have both the family’s and the business’s best interests in mind. Including independent, non-family board members adds invaluable outside perspectives, helping to balance family interests with business needs even more.
Family Constitution
For added structure and clarity, many families develop a Family Constitution. This written document formalizes the vision and values, as well as policies and guidelines for family employment, succession planning and conflict resolution.
Succession is one of the most critical and complex challenges a family business must address – and what is in the best interest of the business should always be the foundation for arriving at an answer.
Start by determining the skillset and leadership qualities needed to successfully run the business in coming years.
These should not be limited to business knowledge and industry expertise, but also include the ability to manage business and family relationships, drive growth and uphold the family’s values.
Next, conduct an objective assessment of potential successors within the family and among key employees, evaluating capabilities, experience and readiness to take on the leadership role.
Be honest about the abilities and strengths of each candidate, including family members. If skills or qualities needed for the role are lacking, consider additional training or development to bridge gaps.
In some cases, however, you may need to acknowledge that the best choice for future leadership lies outside the family. This can be a difficult realization, but hiring a non-family professional to take the helm might be the right decision for ensuring the continued success and longevity of the business.
Managing communication in a family business is always challenging, but even more so when individuals with very different personalities are involved. Using a range of communication forums and inviting all relevant family members to participate goes a long way toward preventing non-productive clashes and getting everyone on the same page.
For example, regular family business meetings that include those actively involved in day-to-day operations provide an opportunity to discuss strategic business issues, address immediate concerns and make important decisions. Supplementing these with family council meetings can keep family members aligned with shared values and the long-term vision for the business, while making sure all voices are heard and that the family’s goals are integrated into the business strategy.
Additionally, annual meetings are a great way to help family members (whether involved in the business or not) stay informed and engaged. These meetings are especially ideal for building understanding across generations, reinforcing the family’s commitment to the business and encouraging interaction among those who don’t regularly communicate.
Throughout our series, we’ve stressed one thing again and again: family business planning requires a unique approach. An approach that fully addresses all the special challenges, concerns and topics crucial to the longevity of family-owned entities, and which traditional business planning models ignore.
So, now that you’ve seen how integrated planning is thoughtfully designed to support family-owned entities specifically, we hope you’ll take our insights and deploy this framework going forward.
It is, without doubt, the best roadmap for strategically strengthening the family, business and legacy you’ve built.
If you have questions or would like assistance, we’re here to support you in making the shift and through every step thereafter.
