With the speed of business moving faster than ever, who in your business is minding the future? What can you do TODAY to plan for the future of your family and your family’s business?
Element One: Plant People
A Chinese proverb says: If you are planning for a year; plant grain. If you are planning for a decade; plant trees. If you are planning for a century; plant people. As a shareholder or manager are you planting by helping the next generation decide their destiny? Are you providing the training children need to decide if they should join the family business? Are you coaching and pushing the next generation to excel?
Jim Roseman, an Anderson consultant, commented, a business is like a tree, what we see above the ground (its trunk, limbs and leaves) are a reflection of its roots. This is also true of a family business. As your business grows, consider the following steps to enhance your family business’ root system.
- Determine if your root system can support another limb.
Can the financial performance of the business support more family? Family businesses have to draw the line on family employment. The best rule is to only allow in those family members that can add value to the business.
- Develop a ritual for nurturing growth.
Establish criteria for employment and promotion. This may include testing (i.e. Myers-Briggs, Birkman, HumanSide, etc.), interviews by independent professionals and periodic “no-holds barred” objective and professional performance evaluations. Remember you are nurturing, the farmer never gets angry at the seeds.
- Articulate the role and responsibilities of the management team.
In many family-owned and managed businesses, the lines sometimes become blurred between family and business issues. Do your best to keep ownership issues away from the day to day operations.
- Prepare the new leaders for the future.
Just because the son or daughter is the oldest child does not qualify them to ascend to the top leadership role. Secure outside counsel to evaluate the potential family leaders of the future.
- Be ready to step aside slowly and allow growth.
Apples may not fall far from the tree, but the roots can go anywhere. As the new family members begin their own root system, allow them to discover their own path, even if it feels like they are professionally “living on the edge.” Practice letting go on the simpler issues and then when the day comes to take your hands off the tiller, it will not shock the system.
- Remember to cross-pollinate.
Non-family managers may not be a part of the central root system but they are an important part of the continuity and success of almost every family business. Make an investment in their future and they will help you steer the family business into the future.
Element Two: Protect the Golden Egg
Remember the story of the goose that laid golden eggs? In the story the goose laid a golden egg every day, but this was not enough for the farmer who owned the goose. As you will remember, he killed the goose with the anticipation that he would find all of the golden eggs at once instead of having to wait each day for the golden egg. The “goose and the golden egg” issues in family businesses are:
- Establish a sound financial reporting system.
Measuring the performance of your business in financial and productivity terms is mandatory. Go beyond the income statement and balance sheet and examine the daily and weekly measurements.
- Plan your work, and work your plan.
An old saying, but still profound advice. With technology changing how we do business on a daily basis planning has become more critical. Two of Jack Welch’s golden rules for business success are, “change before you have to” and “if you don’t have a competitive advantage, don’t compete”. In the REGENERATION Partners’ Family Business Survey CEO/owners revealed that only 20% of family businesses have a written strategic plan. Effective planning comes from not only looking at the performance and trends of your business, but also includes an examination outside your business and considers such factors as the industry, the economy, and maybe even the social and political landscape.
- Formalize competitive intelligence. If you don’t know how to effectively build and use competitive intelligence, starting places would include seminars, universities and outside consultants.
Element Three: Protect The Goose
Families work many decades to build successful businesses that provide wealth and employment. Without careful planning the succession of ownership and wealth may create burdens such as taxes and conflicts. Many families fight over who controls and gets money from the goose that lays the golden egg while others want to kill the goose to get all the golden eggs today. Begin protecting the goose and minding the future by:
- Look at the estate tax and management issues.
Do proactive planning for the ownership and management transfer. Remember, liquidity may become critical just to protect the wealth that has been created.
- Think about the economic power of your business and wealth.
What is your estate capable to generating in the way of income for your retirement? Is their enough to support family members projected lifestyle? What about civic and philanthropic values? Pause and reflect on the power of the goose that lays these golden eggs.
Element Four: Harvest
Harvesting a successful career from a family business is one of life’s most challenging events. It is not easy, but the following advice from one that has been there may help:
- If you are the senior generation, set aside a weekend and take your spouse on a trip to a quiet and peaceful place to talk. Talk about your own needs, dreams and desires for the remaining years of your life. Focus on those things that will add meaning to allow each of you to fully enjoy your life. Come to a mutual agreement about what you want the future to bring to you and your family.
- Have a series of meetings with all of the members of the family to open a dialogue about the future. Some of the meetings should include all of the children so they can see the process and learn how families communicate in positive ways about family issues and the future. Security comes from understanding what the future beholds.
- If you have several family branches in the business, first have a meeting of the head of each family to talk about the future. This can get complicated and you may want to involve a family business consultant or others to help. The objective is to reach a consensus on the business future.
- Start acting on your plan today make it happen; don’t procrastinate.
- Measure the success of your plan. Don’t be too rigid, and be prepared to change it as new information on laws, taxes, needs of the family and the”Golden Goose” production changes.
Now that you are minding the future, kick back and enjoy each day of it as it arrives with the comfort that you will enjoy harvesting. Need help putting a plan in place? REGENERATION can help.