Danai Pathomvanich
Apr 1, 2015
Today’s family businesses are often governed by men and women from multiple generations of extended families that require more inclusive and flexible business structures.
In their book, Strategic planning for the family business – parallel planning to unify the family and business, Randal S Carlock PhD and John L Ward PhD said changing social and family values are shaping new roles beyond that of owner manager.
“Today’s family businesses with more inclusive structures, can be organic institutions that change and prosper with each leadership generation.
Limited old structures
In the past, Carlock and Ward said family business planning focused on two key issues, estate and management succession.
Today’s family businesses require much more because businesses have become not only tools for profit but for self-expression, innovation and legacy.
Moreover, many business families today are not directly involved with running a business, but participate in a wide range of enterprise activities including family holding companies, family investment partnerships or family foundations.
”All these activities create challenges and benefits for the family.”
Planning important
Careful planning, the authors said is important for today’s family businesses particularly since conflict is a natural element of human relationships.
“Unfortunately for some families, conflict becomes the regular pattern of interaction.”
If families allow unresolved or recurring conflicts to diminish communication and trust, it becomes difficult to share ideas, discuss issues or make effective decisions.”
Family enterprise continuity plan
The authors suggest that most families should have a “family enterprise continuity plan” that will encourage the next generation and in-laws to learn more about family history and values.
It also reinforces sound family communication processes and supports development of family agreements on issues such as employment and ownership before specific decisions are made.
It also provides a fair and transparent process for family planning and decision making and clarifies expectations around inherently difficult issues such as money, careers and control.
Parallel planning process
In addition to a family enterprise continuity plan, the authors suggest that owners should consider developing and articulating parallel family and business strategies that are understood by all stakeholders.
For instance family values and business philosophies should be developed and articulated as planning process foundations.
In addition, strategic thinking models should include family as well as management team implications.
Successful families and businesses, the authors said are also driven by shared future visions and requires formulating clearly defined family and business plans.
Human nature creates many family planning obstacles throughout the generations.
• Senior generations
For instance, senior generations may doubt the younger generation’s capabilities and often resist business direction and strategic change because they fear loss of enjoyment from their participation in day-to-day operations.
In these situations, the author suggest meaningful career opportunities should be clearly articulated for all family members and senior members can be given future strategic planning roles that contribute to the firm.
• Successors
Many family business successors are often burdened with family expectations and have self-doubt about their capabilities. They are also confronted with sharing power with multiple disparate shareholders.
The authors suggested that family and business governance structures that have clearly considered areas such as commitment and vision could be created.
In addition, official management development activities for all interested family members could also mitigate the problem.
• Spouse
Because spouses are a critical family business element, their concerns should also be clearly addressed.
Marital relationships and long-term financial security are often issues that must be addressed.
The authors suggest that this particular obstacle can be addressed by creating future lifestyle strategies and plans as well as personal estate and financial plans.
• Other stakeholders
A final important group that must be addressed are other stakeholders who are involved in the family business.
Their main concerns, the authors said are fear of personal relationship losses when new generations take over the business and their own future personal financial stability.
This group’s fears can be best addressed with well-articulated succession plans and employee benefit plans that ensure retirement financial stability.
