By Nic White-Petteruti

We’ve been successful, we’ve grown, and our revenue and headcount indicate that we’re not the mom-and-pop shop we started as, what do we do now?

Many successful family-owned businesses, whether growing organically or through acquisitions, reach a point where success creates an entirely new set of concerns. It is at this inflection point that many family-owned businesses realize they may need to approach long-term planning in a more strategic way than they may have in the past.

Unburdened by shareholders’ expectation of short-terms gains, family-owned businesses are often well positioned to apply a long-term perspective to their growth strategy. This freedom to take a more comprehensive approach to strategic planning broadens the universe of options, but can also highlight a need for meaningful deviations from the status quo to drive the business to the next level.

Barriers to Successful Strategic Planning

Through Axiom Consulting Partners’ experience working with family-owned businesses, we have identified some common hurdles to an effective strategic planning process.

  1. Historical inertia: When a family-owned business decides to engage in a formalized strategic planning process, it is usually after riding a wave of success and growth. This success can create reluctance to change the way the business functions and this inertia can be hard to overcome. Some owners may conflate culture, opportunistic growth, hard work, or even luck with strategy. In other instances, even while owners may be willing to change course, stakeholders (e.g. non-owner leaders and managers) assume that they need to do things the same way since that’s how the owners Regardless of the attitudes of the owners, it is difficult for people to recognize that the actions that got them to this point are likely not going to get them to the next level of growth.
  2. Inward focus: Family-owned business can have an over-reliance on instincts and opportunistic growth, while underestimating complexities that may arise in the future and failing to identify potential looming disruptions. This inward focus can also result in an over-reliance on homegrown leadership talent. While not a negative in its own right, leadership that hasn’t been tested outside of the bounds of the family business may limit the influx of new ideas and points of view that would otherwise benefit the business.
  3. Differing generational expectations: Many family businesses feature multi-generational ownership. Founders, their children and even their grandchildren often have varying ownership stakes and input on the direction of the business. The founders may be dead-set on maintaining the character and culture of the organization they created or ensuring the stability of the business for the next generation. Children and grandchildren might want to drastically reshape the business or simply be looking for an opportunity to exit. It is these misaligned expectations that contribute to the dramatic decline in family ownership by generation (only 12% and 3% of family businesses survive to the 3rd and 4th generations respectively)*. Any long-term strategy needs to account for the varying goals and expectations of current and future decision makers.


Four Approaches for Success

Overcoming these hurdles involves more than just presenting a strategy and getting stakeholder buy-in. It is crucial to approach the strategic planning process with care and flexibility. A strategic plan must acknowledge the success of the organization to date, while identifying opportunities to cultivate new and possibly uncomfortable changes. We have found the following approaches to be effective in developing successful strategic plans for family-owned businesses:

  1. Harness the good, dispense with the bad: What’s the secret sauce that has helped the company get where it is today? Which success factors are most relevant in today’s business environment? And which will be tomorrow? In order to retain continuity, and more importantly, a business’s sense of self, it is important to harness those success factors and leverage them in a long-term strategy. Equally important is recognizing that there are things the company has done in the past that won’t be relevant or smart business going forward and that must be left
  2. Illuminating the business: One of the most important aspects of any strategic planning process is the introduction of new ways of thinking and cultivation of internal debate. Not only does this drive a more comprehensive strategy, it drives stakeholder (e.g. owners/key decision-makers) engagement. In an increasingly data-rich world, analysis and data visualization can be used to highlight new opportunities or shine a light on capability gaps. Whenever feasible, bringing more employees into the strategic planning process can also encourage new and differing points of view.
  3. Understand the end game: The goals of the owners form an important guidepost for any organization, but especially for a family-owned business. The strategic themes of a business looking to sell itself in the next five years (maximizing EBITDA) are very different from those of one that hopes to continue operating under family ownership for another 20 or more years (minimizing downside risk). Establishing clear expectations around future ownership timelines at the outset of a project will encourage more directed reflection and help define expectations.
  4. Recognize that change is hard: Change can be difficult for any organization, and this is no different for family-owned businesses. By engaging in change management at the beginning and throughout the entire strategic planning process, rather than simply at the end, businesses can ease a time of transition. It’s important to help stakeholders understand how the next five years may be different than the last five to ten. Driving towards early agreement on the degree of change required will help to more clearly define the world of possibilities for the organization and will condition stakeholders for the eventual recommendation.

Creating a strategic plan is an exciting time for any organization. For a family-owned business, the start of a long-term planning process is an intersection point, validation of years of hard work and the realization that sustaining growth might require substantial change to the status quo. Recognizing and embracing the unique characteristics of family-owned business and leveraging the best practices outlined above can ensure a more successful strategic-planning process.

*Family Business Institute – Family Business in Transition: Data and Analysis, 2016


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