Creating a Strong Family Entity: The Importance of Setting and Achieving Family Goals

Introduction

Family businesses are unique and dynamic entities that bring their own set of challenges and opportunities. One of the most important challenges that family businesses face is the need to create a shared vision and set of goals that align with the interests of all family members. The process of goal-setting in a family business can be more complex due to the emotional issues that arise when multiple family members are involved. However, goal-setting is critical for creating transgenerational value and avoiding the fragmentation of wealth. In this article, we will explore the importance of setting family goals and how to achieve them effectively.

Importance of Family Goals

A family’s vision or set of goals provides the foundation for creating a strong family entity. A shared vision answers the “Why?” question and helps create non-financial utility, which includes an emotional attachment to assets. (Astrachan & Jaskiewicz, 2008). Having a unifying vision or set of goals can act as the glue keeping the family together, especially if the family does not hold interests in a family business (De Groot, Mihalache & Elfring, 2022).  Having a vision in place is often found in family businesses, and it guides a family in allocating resources (Chrisman, Chua & Zahra, 2003). A vision will guide the family in ensuring that their goals are not misaligned with the goals of the family business (Kammerlander, Sieger, Voordeckers & Zellweger, 2015).

The process of setting family goals is also critical for aligning family logic with business logic. If goals are misaligned, this can result in criticism from family members and lead to fragmentation within the family. The goal-setting process of families is often more complex than that of companies due to emotional issues being brought into the picture (Kotlar & De Massis, 2013).

Having a shared set of goals can strengthen the transgenerational orientation and limit family members from pursuing their interests without regard for other family members (Suess-Reyes, 2017). On the other hand, a widening of ownership over generations can contribute to a larger goal diversity and heterogeneity of diverging or incompatible visions (Kotlar & De Massis, 2013).

The Process of Setting Family Goals

The process of setting family goals should not be a one-off activity but should be done at regular intervals so that families can become adept at the process (Levesque & Subramanian, 2022). The process should involve outside advisors who can help drive the process forward (Cabrera-Suárez, De Saá-Pérez & García-Almeida, 2001). The advisors should have experience in dealing with the emotional issues that arise in the goal-setting process of family businesses.

The goal-setting process should involve all family members, and the dominant coalition should facilitate the process (Chua, Chrisman & Sharma, 1999). The family’s goals should be well-defined, measurable, and aligned with the family’s resources and capabilities (Habbershon, Nodqvist & Zellweger, 2010). The family’s goals should also be aligned with the goals of the family business, and synchronization of the family and the business logic needs to occur (Lambrecht & Uhlaner, 2005).

Once the family’s goals have been defined, a governance structure should be put in place to ensure that the goals are achieved. The governance structure should be set to the least intrusive level that still provides value to the family, and the family members should voluntarily subjugate to the governance structure (De Groot, Mihalache & Elfring, 2022).

Managing Diverging Goals

One of the challenges that family businesses face when setting goals is managing diverging or incompatible visions. Such diverging goals must be addressed and managed to avoid goal-driven fragmentation (Kotlar & De Massis, 2013).

To manage diverging goals, social interaction within the family is critical to achieving a compromise that does not come at the expense of group thinking or the avoidance of conflict (Bettinelli, Mismetti, De Massis & Del Bosco, 2022).

Family members may not always want to commit to a shared set of goals, or goal-divergence becomes too entrenched, resulting in a deadlock in the family. In such cases, subjugation to family governance structures should be voluntary (De Groot, Mihalache & Elfring, 2022). Alternatively, an exit from the family could be considered (Jaffe & Lane, 2004. Since the perception of losing flexibility and increasing accountability may result in resistance to the governance structure (Vazquez & Rocha, 2018), it is important to strike a balance between the family’s goals and the governance structure that facilitates their attainment.

The Governance Framework: aligning Resources and Capabilities

A governance framework is crucial in aligning the goal-planning process with execution. Governance should be set to the least intrusive level: overbearing governance structures will result in an overly bureaucratic and slow decision-making process. On the other hand. a governance structure that is too soft will result in a lack of accountability and efficiency (Kammerlander, Sieger, Voordeckers & Zellweger, 2015).

The governance structure of a family business is critical in aligning resources and capabilities with the family’s goals. Setting family goals is ensuring that they fit with the capabilities and resources of a family and their advisors (Kammerlander, Sieger, Voordeckers & Zellweger, 2015). Resources need to be mobilized in the right sequence and amount to enable a family to achieve its goals. If this is not provided, a family may fall short of expectations resulting in frustration or not wanting to re-commit to new goals (Kammerlander, Sieger, Voordeckers & Zellweger, 2015). Therefore, it is essential to assess the family’s resources and capabilities before setting goals.

Family governance fosters communication between family members and strengthens the transgenerational orientation. However, agency issues may render family governance structures ineffective (Lambrecht & Uhlaner, 2005). Similarly, the perception of inequitable situations among family members may result in internal politicking, leading to a lack of focus on goal attainment (Kidwell, Kellermanns & Eddleston, 2012). Therefore, it is important to ensure that the governance structure facilitates the alignment of resources and capabilities with the family’s goals.

Conclusion

In conclusion, setting family goals is critical for creating a strong family entity and transgenerational value. The process of setting family goals should involve all family members, and the dominant coalition should facilitate the process and involve outside advisors when needed. Once the family’s goals are well-defined, a governance structure should be put in place to ensure that the goals are achieved.