Building Consensus in a Family Business

Family Business Expert suggests...
First, contruct a strategic plan for the family

One of the most difficult problems confronting family businesses is building a consensus about how the business should be operated, now and into the future.
In a non family business, the answer is rather simple and obvious: Develop and implement a strategic plan.

In a family business, the process is dramatically more complicated and filled with situations that might 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 may develop a successful strategic plan for the business, there must first be a strategic plan for the family.
For example, ensuring the senior generations financial security, independent of the business, often is a fundamental requirement of the familys strategic plan. Meeting this target 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 distinct financial target of the family, as opposed to reaching a business objective such as ROI, or other ratios or measures of profitability.


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 almost always easier to determine, and they are usually related to life stages. For example:



Parent Offspring
Conservative Aggressive
Risk adverse Risk getting
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.
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.


The Role of Facilitators
Because many of the inter- generational and intra-generational issues can be "confrontational," it is almost always a wise investment to retain a "facilitator" trained and experienced in dealing with family business dynamics.
This facilitator may assist the family in organizing and prioritizing real or perceived differences among various family members. 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 experience of the business. From an Operations Management perspective the most difficult problem is clearly identifying the crucial operational characteristics of the business. To overcome , this process should be independently constructed and must be based on operational acquired skill , 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 many people , memory, and varying degrees of managerial expertise to reach their business goals and objectives, rather than generating a sound operating system.
As an illustration, I fairly 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 almost always could 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 instructions immediate attention.


A Three-Legged Stool
Building consensus in a family business may 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.