This week, we had an interesting lecture as part of the Award in Leading a Family Business course. As part of Module 2, the focus is how a family business can build a strategic mindset, use strategic planning to align family needs and commitment to the business needs and also build a solid strategic plan for the family business to remain ahead of the change curve. It is obvious that many family businesses are hugely lacking on the strategic front.

The normal progression of things in a family business is that until things are going well, no one gives a hoot about strategic planning. Then when things start falling behind, when financial results start moving backwards, this is when many family business owners feel at a loss. Many feel at a great loss when faced with the question “What is your strategic plan?” At best, family business owners may have annual operating plans, but nothing much beyond that.

This is one of the most evident difference between public companies and private family businesses. While most public companies have some type of strategic plan, many privately owned family businesses have not put pen to paper. They have operated based on the values the family business was founded on. For many years, with less change and turbulence, that was sufficient. This is especially true of businesses where the family members are still involved in the day to day. Family members have always set the course for the company, and it works — until it suddenly doesn’t.

There are many circumstances that create the need for families to take a more strategic look at their business – business results are heading south, the present family leader needs to plan his retirement and succession, the business has grown and needs to strategise what it needs to focus on. The reasons are numerous, but the conclusion is the same. It’s time for a strategic plan, first to understand, than to plan a new way forward.

However, whether embarking on strategic planning for the first time, or refresh an existing plan, it’s important to appreciate how building a plan in a family business is different from strategic planning at other companies. At the most basic level, any family business strategic plan needs to take into account the desires and goals of the family ownership. It is likely that such owners have other goals and aspirations besides the financial goals for the family business, which in turn will impact the performance of the family business itself.   Moreover the family owners need to make sure they are clear as to WHY they want to own this business and why they want to be in business together. Owning and running a family business is not just a job. It’s a lifestyle choice.

This also means that the family’s values need to be allowed to play a big role in strategic planning and keep well in front of everyone’s mind when the family business is building a long-term strategic plan.

Which brings me to the crux of the whole matter, at least in my humble opinion.

The one hundred million dollar question any family business strategic plan needs to answer is “How can the family grow the business while still maintaining the values and culture that have made them successful? Is that at all possible?”

The answer is maybe. I have seen many situations that family businesses have seen their cultures hugely challenged as many younger employees feel that the prevalent culture in a family business is based on having things done like they where always done, whilst not allowing space for improvement and for new ideas to be heard. This leads such family businesses to lose out on some very good talent.

This means that strategic planning in family businesses often means challenging dearly held assumptions. It is important to do that with respect and dignity. The strategy work needs to honour and be informed by the past, but not be limited by it as you look to the future. In my opinion, the best way to start challenging old assumptions and shaping new ones is to engage a broader group in the strategic planning process, possibly external advisors that have gained the trust and confidence of the family business owners.

Taking all the above into account, below please find some best practices I find to be useful for family business embarking on a strategic planning journey:

• Give due importance to the financial goals and aspirations of the family ownership at the outset of the process. Get clarity on what the family wants and how that connects with their aspirations. Understanding the relationship dynamics among family and non-family persons involved in the family business is important.

• Incorporate the family values and culture into the future direction of the business. Most importantly, values and culture should be baked into the plans that will support how the outlined strategic goals will be achieved. The strategy should clearly outline not just what the business will pursue and how it will do so, but more so the strategic journey should identify the WHY of the family business. Why does the family business exist?

• Engage a broad set of leaders in the strategic plan formulation journey. A broader group of managers at the family business should be involved early in the strategic planning process to build their capability, leverage their wisdom and create deep ownership of the plan. This process builds strategic thinking capability and breaks the pattern of the senior family members as the only ones who get a say about where the company heads. Establish a strategic planning working group and give them specific assignments that deepen their understanding of the business. This is a good way to develop leaders internally and see what type of talent you have in your pipeline. Having this process assisted by external advisors can add a much important external perspective to have a more solid strategic planning journey.

• Challenge Assumptions.  Encourage team leaders to do the same. Set expectations that closely held assumptions, even if they led to past success, may need to be challenged, and that challenges will be presented openly and respectfully. Create permission to see what else might be possible for the company. You can do this through facilitated discussions and tools designed to look at deeply held beliefs. This can help you create new possible futures for the business.

• Collect new data to explore possibilities and opportunities and take your time doing it. This process is new for most people in any family business. The strategy team, leading this journey, can engage other stakeholders by getting input on key strategic questions about the business and the customers.

• Build skills in alignment and productive conversations while developing the strategy. In businesses led by strong family members, other key people may be accustomed to being told what to do and have not participated in strategy conversations. While they have ideas of their own, they may not have had a forum to share them or have them acted upon. 

• Develop a comprehensive engagement and communication plan to roll out the new strategy. This may seem obvious, but in many family businesses, communication on strategy and direction is not always the norm. In fact, in many family business the financials are never shared with employees. It’s hard to set a new goal for everyone to pursue if they don’t know how the company has been performing. It’s also important to realise that going after financial targets is not always the best motivator in these types of businesses. You may need to focus on the purpose and mission of the business and be thoughtful about how to engage the workforce in shifting direction.

In conclusion, building strategic plans for family businesses, and executing them well, helps ensure prosperous longevity for these businesses, which the families view as their “baby.” No fancy analysis or detailed 110-page strategy report is going to convince a family to go in a certain direction if it is not consistent with what they care most about or how they want to spend the earnings. However I can vouch for one thing. Family Businesses that take the time and invest the necessary resources to build a proper strategic plan, built with and by their own people, ultimately increases performance significantly. The end results is that family business leaders are more strategic and energised, whilst the family business is successful at achieving their ambitious targets. After all you cannot achieve, what was deemed unachievable, if what needs to be achieved is not clearly set and planned for.