Make Sure Family Business Has a Strategy
There is an old adage that says,
“Failure to plan is planning to fail.” Many family business researchers agree
that one of the main reasons for failed family business successions is a lack
of effective decision — and a lack of proper planning. The vast majority of
family businesses fail to plan effectively.
One survey showed only 37% of family
firms had a strategic plan. This not only shows a tremendous opportunity for
family businesses to improve their performance, but also illuminates a need for
more effective decision making.
Family businesses that have a
strategic plan usually have more effective governance, board meetings, written
hiring policies, buy- sell agreements, a formal valuation of company worth,
more employees, and are more likely to have selected the successor.
More importantly, they have higher
sales and higher international sales as well. These positive outcomes point to
the importance of the strategic plan in helping the company manage the business
in a more rational and professional manner that can boost business performance,
productivity, and effectiveness.
In a recent survey of family
business owners by the giant accounting firm KMPG, the following issues and
challenges were rated as the most troublesome or important:
- Growing profitably
- Balancing different interests
- Dealing with regulatory
- Planning succession
- Determining future directions
- Exiting by retirement
- Establishing professional
- Selling the business
- Managing family relationships
- Addressing international growth
One recent survey showed the
majority of family firms did not have any international sales which is very
surprising, considering the large prevalence of family firms in most
industries. Instead, these firms were more concerned with domestic competition,
and day to day problem solving. This type of short-term thinking is the result
of a lack of proper planning.
There are multiple and deep seated
reasons why many family firms fail to effectively plan; conflict, family
dysfunction, poor management, and the lack of proper governance tools such as
boards, and shared decision making are the most common reasons.
The answer for family firms is to
progress through the strategic planning process in a logical fashion.
The business must first perform
research on the marketplace, the customers, the competitors, and the suppliers.
The strategic planning process includes the development of the company mission,
vision, and values, performing an analysis of the strengths, weaknesses,
opportunities, and threats (SWOT), development of company goals, strategies,
objectives, and action plans, establishment of company targets, organizational
review and development of key performance indicators, and a financial plan.
The end result will be a written
document that can be updated and reviewed as needed. In the past, strategic
plans were commonly forecast for 5, 10 and 15 years into the future.
Now, with the increasingly fast pace
of business today, one to five year plans are more common.
It is not easy. Although it is quite
possible to write the strategic plan themselves, some family firms hire family
business consultants to guide them through the strategic planning process. The
proof is in the pudding; research shows having a strategic plan is associated
with better performance and an increase in longevity.
Keanon Alderson is an associate
professor in Robert K. Jabs School of Business at California Baptist University
in Riverside. His book “Understanding the Family Business” was published last
He can be reached at