Itís Not Too Late for Your New Yearís Resolutions: 5 Essential Components in a Successful Family Business
by Jane Hilburt-Davis
It’s that time again. We all try to make and keep resolutions. Some of us are better at it than others. Our resolutions usually focus on breaking bad habits (quitting smoking); some on creating good habits (regular exercise). Experts do agree that there are some ways to improve our chances of keeping our resolutions. Here are some tips for doing just that. Be SMART to set yourself up to succeed not fail:
S= Make your resolutions specific. For example, rather that saying I will lose weight; say I will lose 5 pounds in the next 6 weeks.
M= Your resolutions should be measurable and observable to others. For example, rather than saying my company will be more profitable in 2008, say we will increase my revenues by 5% this year.
A= Your goals should be attainable. Don’t set yourself up to fail by creating unrealistic resolutions (I will never get mad at my employees again.) Rather make an attainable goal: If I get angry at my employees, I will count to ten before I say or do anything.
R= Although it seems like a contradiction to attainable, make one of your resolutions a reach. Try something new, be creative, break old stale patterns, try something you’ve always wanted to do: fly a plane, take yoga, read a book on a place you always wanted to visit, run a marathon, do volunteer work.
T= Each resolution should have a time table. If you’re going to clean up the clutter in your office, set a date for completion. If you’re going to take everyone on your management team to lunch to understand their interests and ideas more fully, plan to accomplish this by June 30, for example.
Now that you have some tips for keeping your resolutions, I’d like to make some recommendations for your family-business resolutions. And here’s why. Research and our years of experience indicate that the following are correlated to family business success:
1. Create a succession plan.
You can never begin succession planning too early so start now! Be prepared because it’s both a time of crisis and opportunity. Successful families in business take advantage of this transition time as an opportunity to develop an objective process that creates an atmosphere of collaboration, lowers the emotionality in the system, and establishes benchmarks for the company, the board, as well as the management. First, involve the kids while they are still kids. (Ok, you’ve waited until they’re all in their 40s, see below for more tips.) Talk about the business with them; let them help out; also remind them that entering the business is not a right, and they’re free to choose their own career paths when they grow up. Secondly, start by leaving the people out of the plan first. No names, no personalities, just review your strategic plan (OK, you don’t have one. Again, below.) articulate your family’s vision for the future in order to determine what kind of leader you need to get you there. Once you have the values/vision, goals, objectives, and criteria in place you can start thinking about what kind of person or group of people can get you there and how those people will be chosen.
2. Develop an Effective and Independent Board.
In order to take the long-view, and ‘get out of the weeds’, something that too many very busy business owners get distracted by, take time to create the best board possible. In my experience, a combination of insiders and outsiders whose decisions are based on the good of the company is worth its weight in gold. Some of the most critical qualifications for board members are the courage to hold the company accountable, the discipline not to interfere in company operations (i.e. the old saying, “noses in, fingers out), good business judgment and vision; integrity to keep their own agendas out; and sufficient time to contribute actively to the company and its performance. One note here: while building a productive board, pruning of family members who sit on the board just because they’re family, should take place. This is difficult but a necessary task. For this, I have also found first to set the criteria for directors, leaving the individuals out. Once the criteria are in place, the board and its directors have the responsibility to eliminate all those who do not meet the criteria.
3. Create a Strategic Plan.
Simply put, strategic planning is creating a plan of action. Originally from the Greek roots, STER, to spread out, usually in a military sense, and AG to drive or to lead, the word strategy conjures up images of preparing for battle, or competition.
It's different from 'vision' which is a future imagined, a hope of how things can be in the farther into future, 10-20 years from now. It’s reviewing from a 10,000 foot perspective. A strategic plan describes how you can get there. It's about making decisions in the present for the future and usually involves a 3-5 year time frame. It is both written and lived.
(See more tips on creating your strategic plan at: http://www.familybusinessconsulting.com/resources/strategic-planning.shtml )
The strategic plan should include:
- Where we are going? What are our goals?
- How are we going to get there?
- Who is responsible for what?
- What are the time lines?
- When and how do we evaluate our progress or lack of it?
- What do we do if the unexpected happens? (See “What if Disaster Hits Your Company?” http://www.familybusinessconsulting.com/resources/disaster.shtml
4. Develop a Family Hiring and Employment Policy.
One of the most important documents a family business can have in place is a policy for family hiring and employment. It establishes the business as a meritocracy, not as a shelter for family members needing employment. It sends a very strong and positive message to the non-family employees, manager, and executives. It prevents future headaches and heartaches in the future when cousin so-and-so comes looking for a job for himself or his daughter, just because they’re family. I’ve included in this newsletter a sample framework that I use with my clients to begin the process. The process involves the creation and ratification of the policy in the Family Council that, then, goes to the board for its stamp of approval, and, then, is made public as a policy of the company and reflect the values of the family.
View a sample Policy that Key Resources shares with its clients (PDF).
5. Form a Family Council
A functioning Family Business Council is a forum for discussion, planning, decision-making, and creating agreements and policies for the family and its relationship to the business. Frankness and openness are requirements for the Council to be successful. Every successful family business should have a functioning family business council.
• Overall purposes. Among other things, it is a place to learn to communicate effectively in order to reach agreements. It is a place to check out assumptions, expectations, understanding of each other and oneself. It should be a place where the younger generation can learn about the business and its significance to the family. The membership, frequency of meetings, agenda planning, purpose and goals, ground rules, needs of the family, and decision making processes are among the issues that are discussed first in the council’s development. This shared, structured, formalized experience can lead to consensus building, effective planning, collective actions, and improved communications.
• A Charter. Usually formed by older, larger family businesses that often organize under a charter or constitution to provide a forum for the family members to discuss issues, share information, and become more knowledgeable about unique challenges of family businesses.
• Functions. Typically, a family council:
- Organizes adult members in a forum that has areas of focus and some limited decision-making authority.
- Decides on the family’s relationship to the business, with channeled, focused communication between the board and the family.
- It is not a stockholder meeting but a stakeholder meeting, so that its membership can be larger than the shareholder group if the family wishes.
- It is not therapy or gripe sessions, but instead provides a forum for discussion and open communication, dealing with family issues in order to make informed decisions.
- Promotes family harmony and cooperation.
- Builds healthy boundaries between the family and the business.
- Is educational, informative, and fun; educates family members about their rights, responsibilities, and privileges and about business strategies, risks and accomplishments.
- May include educational briefings by experts on such subjects as estate planning, real estate, agreements, family dynamics, and ownership, etc.
- Establishes procedures for sharing information, conflict management, and reaching decisions on key issues.
- Typical Topics and Issues. Topics and issues typically addressed by Family Councils include:
- Family employment guidelines
- Dispute resolution/conflict management guidelines
- Policy on prenuptial agreements (primarily as these may relate to the business)
- Shareholder/buy-sell Agreements
- Succession plan/process
- Use of family vacation home
- Distribution of business perks
- Business history, stories, founder’s dreams
- Family financial needs and plans
- Conditions under which the business might be sold.
- Family’s vision and goals for the family, and in relation to the business.
- Format: Depending on the work to be done, Family Councils meet quarterly, or semi-annually. In the beginning of its development, if there are many issues to tackle, the Council may meet monthly. Usually, an outside facilitator runs the meetings to assure a fair and productive process. As the Council develops, and there are no serious process problems between members, it’s possible that the family can begin to run its own meeting.