flevyblog

Flevy Blog is an online business magazine covering Business Strategies, Business Theories, & Business Stories.
MANAGEMENT & LEADERSHIP STRATEGY, MARKETING, SALES OPERATIONS & SUPPLY CHAIN ORGANIZATION & CHANGE IT/MIS Other

Building Consensus in Your Family Business

5184416224_6d3392a5f9Building consensus about how the business should be operated, now and into the future, is one of the most difficult problems confronting family businesses.

In a non-family business, the answer is rather simple and obvious: Develop and implement a strategic plan.

In a family business, the process for building consensus is dramatically more complicated and filled with situations that can devastate both the family and the business.

A Strategic Plan for the Family

Many family business owners do not understand that before a family business can develop a successful strategic plan for the business, there should first be a strategic plan for the family. We refer to this as the “Dualism Dynamic”.

For example, ensuring the senior generation’s financial security, independent of the business, generally is a fundamental requirement of the family’s strategic plan. Meeting this goal then becomes a critical objective for the strategic plan of the business.

In other words, the economic engine (the business) is being asked to reach a specific financial goal of the family, as opposed to reaching a business objective such as ROI, or other ratios or measures of profitability. This underscores the importance for building consensus amongst the family members prior to trying to develop a strategic plan for the business.

First Step Toward Consensus

One of the first steps in developing a successful process for building consensus is to clearly understand the different perspectives “between” generations (inter-generational issues) and “among” generations (intra-generational issues).

Inter-generational issues are generally easier to determine, and they are usually related to life stages. For example:

Parent Offspring
Conservative Aggressive
Risk adverse Risk taking
Security conscious Development conscious
Strategy: status quo Strategy: change/growth
Controlling Wanting control
Managing the Past Managing the Future

 

Intra-generational Issues

Intra-generational issues are less likely to be identified and discussed. As a result, these issues tend to “fester” over long periods of time, and they frequently present themselves in an explosive and destructive manner. Building consensus in a family business requires that intra-generational issues be recognized and resolved.

Some of these Intra-generational issues include differences in compensation, perks, status, individual personal values and public recognition factors (visibility). Other problem areas are educational differences, varying levels of personal and professional sophistication, differing opinions of “value contribution,” and, most importantly, spouse issues. Tough issues, that are not addressed, makes building consensus in a family business impossible.

The Role of Facilitators

Because many of the inter-generational and intra-generational issues can be “confrontational,” it is generally a wise investment to retain a Family Business Facilitator who is trained and experienced in dealing with family business dynamics. An objective family business expert can be successful in building consensus in a family business by being an advocate for each faction of the family.

This facilitator can assist the family in organizing and prioritizing real or perceived differences amongst various family members and help build consensus amongst the family. In fact, dealing with these issues can actually become the “agenda” for family retreats.

Objective Understanding of the Business

Concurrent to recognizing the inter-and intra-generational family issues, to develop consensus in an FOB, it is equally essential to gain an objective understanding of the business. From an Operations Management perspective the most difficult problem is clearly identifying the crucial operational characteristics of the business. To be successful, this process should be independently constructed and must be based on operational information, not financial information.

The Importance of Objective Measurement

Unfortunately, in most family businesses the operational characteristics of the business are never accurately or objectively described. Key decisions are based not on hard facts but on various “interpretations” of sometimes unrelated circumstances. This is not an unusual phenomenon: Family businesses tend to rely on well-intentioned people, memory, and varying degrees of managerial expertise to reach their business goals and objectives, rather than creating a sound operating system.

As an illustration, I often ask family business CEOs to question their senior managers about how much work is accomplished daily in their individual areas of responsibility. If these key managers merely are able to report results, without knowing and measuring the labor hours involved, a serious managerial discrepancy exists.

Designing a process for correcting this problem generally can be accomplished within a few days, depending on the complexity of the operation. Validating the operational characteristics of the business should be a high priority issue, one that commands immediate attention.

A Three-Legged Stool

Building consensus in a family business can be compared to the proverbial three-legged stool. There is the Senior Generation, the Succeeding Generation, and the Business. Each “leg” has different needs and issues, and each requires different kinds of expertise to ensure that those needs are met and the issues resolved.

Unless equal importance and attention is given to each group in a family business, optimum stability will never be realized. Unfortunately for many family businesses, building a harmonious consensus will always remain a dream and never become a reality.

The “Nexters”

Succession is not a spectator sport! All too often succession planning and succession management are “back-burner” issues to the family business entrepreneur – until it is too late (the business owner dies or is incapacitated) or many of the smart succession strategies (tax savings and organizational transition) have been minimized. Getting the succession plan organized is a wonderful learning experience (as well as an opportunity for building consensus in the family business) for the nexters.

About Don Schwerzler

Don Schwerzler is one of the world's leading family business experts. He is the founder of the Atlanta-based Family Business Institute and the Family Business Experts website; and has been featured in the Wall Street Journal. Don Schwerzler began his career as a family business consultant in 1967 and founded the Family Business Institute in the mid 80s. The Atlanta-based Family Business Institute is nationally recognized for pioneering the multi-disciplinary consulting protocol that has proven highly successful in dealing with the unique and complex problems that confront and confound families in business together. If you have any questions about family business, you can ask him here.

, ,




Complimentary Business Training Guides


Many companies develop robust strategies, but struggle with operationalizing their strategies into implementable steps. This presentation from flevy introduces 12 powerful business frameworks spanning both Strategy Development and Strategy Execution. [Learn more]   This whitepaper authored by McKinsey Communications specialist teaches us the 4 Cs of Communication Review, so you can find and fix errors in your Communication prior to sending it out. It addresses the most critical elements of Communication across all formats. [Learn more]
We've developed a very comprehensive collection of Strategy & Transformation PowerPoint templates for you to use in your own business presentations, spanning topics from Growth Strategy to Brand Development to Innovation to Customer Experience to Strategic Management. [Learn more]   We have compiled a collection of 10 Lean Six Sigma templates (Excel) and Operational Excellence guides (PowerPoint) by a multitude of LSS experts. These tools cover topics including 8 Disciplines (8D), 5 Why's, 7 Wastes, Value Stream Mapping (VSM), and DMAIC. [Learn more]
Recent Articles by Corporate Function

  

  

  

  

  


The Flevy Business Blog (http://flevy.com/blog) is a leading source of information on business strategies, business theories, and business stories. Most articles have been contributed for management consultants and industry executives with over 20 years of experience. If you would like to contribute an article, please email our editor David Tang at [email protected].

Flevy (http://flevy.com) is the marketplace for premium business documents, such as management frameworks, presentation templates, and financial models. Our documents are of the same caliber produced by top tier consulting firms, like McKinsey, Bain, Accenture, BCG, and Deloitte. Learn more about Flevy here.


Connect with Flevy:

   
  


About Flevy.com   /   Terms   /   Privacy Policy
© 2019. Flevy LLC. All Rights Reserved.