Strategic planning for the family in business
In this recent (2005) paper Jaffe, who is both an academic and consultant, starts from the standpoint that “family considerations often overwhelm the strategic realities of the business and hinder the ability to pass the business on to subsequent generations…..(and lead to) a lack of focus on the need for business renewal”
He has positive proposals for the improvement of business planning in small family businesses: the use of a two-dimensional planning process:
• The family council and
• The business board of directors
The role of each is the following:
i) The family council, which consists of members of the extended family, needs to be able to find answers to fundamental questions such as:
• Who will run the business in the future?
• Who will own it?
• What are the expectations of financial participation for those who work in the business and those who do not?
• How will decisions be made?
They will need in particular to take responsibility for securing the future of the family business in four areas:
• Articulation of mission and values
• Articulation of a next generation development plan
• Agree guidelines for future family involvement
• Agree ownership and transfer policies
Families are not used to discussing these sort of questions and so will need the help of an independent expert (such as a financial planner) to help them.
ii) The business board of directors’ primary task is to look at the business
independently of family concerns and needs. Typically the board will
include those family members who are directly involved in the strategic
management of the business but it will also include non-family senior
managers and external advisers.
Jaffe recommends that the board focus on four areas of strategic planning:
• Business renewal
• Capital needs – business and owners
• Key employees – leadership team succession
• Succession governance – setting the terms of the shift between generations and monitoring the cross-over process
Jaffe makes the important point that the board can only do its job properly if it is fully aware of the family’s wishes and constraints so, although the two dimensions of planning can work either concurrently or consecutively it is vital that there is clear communication between the two. This can be achieved by having some joint members and/or having a financial expert on both bodies.
The planning process has to ask how the family can achieve what it wants (expressed by the family council) with the actual business it has (understood and expressed by the business board).
5.4 Towards an Integrative Model
It is appropriate to look last at an article which summarises past research and attempts to fill in the gaps. Rather than repeat what has been written above this section will just draw attention to the additional thoughts in Le Breton-Miller et al’s paper.
The major gaps which Le Breton-Miller sees are in areas such as:
• The broader, social and business context
• The establishing of clear ground rules for the succession process and evaluation criteria for selection
• Adjustment of the process in the light of feedback
The social and cultural context may, for example, be one which is moving dynamically away from a parochial, mono-cultural context to one of global competition where a multi-cultural approach to succession would be appropriate.
The ground rules and criteria for selection will need to be modified in the light of dynamic change in the marketplace. This need for flexibility – often not easy in family concerns – is again emphasised in the third bullet-point.
It is appropriate that this paper also emphasises the importance of recognising where one is in the business life cycle. Planning is a vital part of the succession process but it needs to take full account of the particular family, cultural, business and market context in which the decisions need to be made.
Tags: business planning, extended family, family business, family businesses, family involvement, financial participation, jaffe, strategic management
