The importance of clarity

The importance of clarity

I have recently been working with a family-owned business and it has been, as always, instructive, enjoyable, and a real privilege to be trusted with some very personal insights.

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Man and woman having discussion in office

Instructive because it has reinforced my belief that the best family businesses plan for the future, and while that in and of itself cannot guarantee success, it provides a strong platform to build from. And if it isn’t enjoyable, what’s the point? The initial focus of many families has been on their values and vision for them and for their business. This is not novel but is vital.

The family shareholders have to be clear what they want to achieve as a group and for the business – their vision – and the rules governing how they wish to achieve this – their values. Of course consensus on these matters is not always easily achieved and it’s worth spending time ensuring all voices and views are heard and understood.

The best business plan for the future

A strong process should be in place to ensure that all key stakeholders, shareholders or not, have the opportunity to have their opinions heard on what’s important to them as a family member and for the business.

Once agreement has been reached on a set of common values, and the vision for the family group and the business has been established, they have to, of course, be communicated. Ensuring the family have that all important clarity on what has been agreed, and how this will actually be managed going forward, is essential.

Values and vision for the business

The hard work may have been done in getting to this stage but it can all be undermined if a strong framework to manage family and board communications is not put in place. There’s a lot more to be said on the structures and processes which can be put in place, but I want to return in a bit more detail to establishing clarity on Values and Vision.

These are the foundations on which the rest of a successful governance structure will be built, so it’s worth spending some considering how best to approach discussions on these topics. The first thing to recognise is that these are very personal and emotional.

Each individual will place a different emphasis and importance on certain matters, and as this is so personal, nothing is “wrong”. In their book “When Family Businesses Are Best”, Randal Carlock and John Ward set out the “Parallel Planning Process” and I have found this an extremely useful framework which I would recommend to anyone considering family governance matters.

Establishing clarity

The framework provides an excellent approach to these sometimes difficult discussions and a structure to consider the important areas. The discussions centre on broad themes, such as:

  • What do the family want to achieve?
  • What is important to them?
  • What are the key individual aims and ambitions?
  • Can they identify their priorities?
  • How do they see the business developing, and what are the strategic aims?
  • What are the views on long term value creation, and on dividend yield?

This takes time of course, and the above represent only a sample of the issues that have to be considered. When consensus is achieved, it’s worth considering how best to communicate the key messages to other stakeholders, not least the board and senior company management.

The parallel planning process

If it’s central to the family’s vision that the business will be passed on from generation to generation and must achieve growth to support the growing family, then it’s important that those running the business understand this. Only then can they develop a clear strategy aimed at achieving these objectives.

This sounds obvious – most good, sound ideas and methodologies are – but it’s amazing how difficult this can all be. Not only do you have to spend a lot of time on these matters upfront and in the future to ensure that strategies are reviewed and renewed as necessary, the “day job” still has to be done.

The day to day wellbeing of the business is however enhanced by adopting this long-term strategic approach, and family businesses are rightly applauded for their long-term focus. I have only touched upon some of the key issues though, and will return to explore these in future articles.

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