For exceptional families, planning for the future is not solely centered on anticipating financial success, but on the perseverance of their legacy, fostering resilience, and ensuring continuity for the coming generations. Family businesses face unique challenges in balancing family values and business demands. By strategically planning for the future, they can build a foundation that supports long-term success.

The Family Council Canvas, our strategic tool designed for Family Offices, will help families navigate this complex planning process. This article explores how exceptional families plan for their future by addressing the essential questions of goal-setting, succession planning, and adapting to an evolving landscape, all backed by key research findings from Leenders and Waarts’ (2003) study on family business competitiveness and evolution.

Identifying Long-Term Goals

Exceptional families understand the importance of clearly defining their long-term goals, both for the family and the business. Family businesses must align their goals with their values, taking into account both personal aspirations and business objectives.

In their research, Leenders and Waarts (2003) outline the Family Business Space, within which a family can place its conflicting orientation towards the family and/or the business.

Families can be placed into a two-by-two box of:

  • House of Business: a low family orientation. It’s all about the business
  • Hobby Salon: both low family orientation and low business orientation. The business is more for pleasure and having an occupation or an artistic outlet
  • Family Life Tradition: high family orientation, but low business orientation. The main aim is to support the family. This type can lead to agency issues.
  • Family Money Machine: both family and business orientation are balanced simultaneously

Family businesses with a strong business orientation tend to focus on growth and professionalisation, evolving towards a “House of Business” or “Family Money Machine” model. These types of businesses prioritise financial success and management efficiency. In contrast, family-oriented businesses may focus more on preserving family traditions and maintaining a strong familial bond, which can lead to a “Family Life Tradition” or “Hobby Salon” approach.

Best Practices:

  • Vision Alignment: Ensure that all family members agree on the long-term vision, balancing family values with business growth. Our Family Council Canvas is an excellent tool for defining and aligning values within your family.
  • Scenario Planning: Develop multiple future scenarios based on potential market conditions, family dynamics, and economic changes. Draw a risk matrix to identify major threats and create an action plan to eliminate them on time. Discover your strengths and opportunities based on past successes and create short-, mid-term and long-term goals based on them.
  • Document the Vision: Keep a written record of the family’s long-term vision to guide future decisions and strategies. Our upcoming tool will help you create a strategic Family Council Canvas that you can revisit and revise later.

Succession Planning

Succession planning is one of the most critical aspects of future planning for family businesses. According to Leenders and Waarts (2003), while business orientation tends to naturally strengthen over time, the family aspect does not follow a clear pattern. This means that succession planning can be a challenging and unpredictable process. Exceptional families approach succession by preparing future generations early, ensuring that they have the skills, knowledge, and desire to take on leadership roles.

Best Practices:

  • Early Preparation: Identify potential successors early and provide them with the necessary education and experience to lead.
  • Mentorship Programs: Implement mentorship programs where current leaders guide the next generation in understanding both the family and business aspects of the enterprise.
  • Inclusive Discussions: Involve the entire family in succession discussions to ensure transparency and buy-in from all members.

Adapting to Change

Family businesses operate in a dynamic environment, influenced by market shifts, technological advances, and changing family structures. Exceptional families recognise the need to remain adaptable and flexible in their future planning.

Leenders and Waarts’ (2003) study highlights that businesses that focus on innovation and adaptability tend to outperform those that stick to traditional methods. These businesses are often more capable of navigating transitions and seizing new opportunities. Exceptional families build flexibility into their plans by regularly reassessing their goals and being open to new ideas and strategies.

Best Practices:

  • Regular Strategy Reviews: Schedule annual or bi-annual strategy reviews to assess market conditions, business performance, and family dynamics.
  • Foster a Culture of Innovation: Encourage family members to bring forward new ideas and solutions to keep the business competitive.
  • Agility in Decision-Making: Create a decision-making structure that allows for quick responses to changing circumstances.

Balancing Family and Business Needs

One of the greatest challenges for family businesses is balancing the needs of the family with the demands of the business. Exceptional families create strategies that integrate family values into the business while also ensuring that the business remains competitive.

Leenders and Waarts (2003) note that family businesses that achieve this balance tend to adopt the “Family Money Machine” model, where family involvement remains strong but is complemented by professional management practices. This allows the family to stay connected to the business while also benefiting from external expertise and leadership.

Best Practices:

  • Family Council: Develop a family council that outlines the family’s role in the business, values, and decision-making processes.
  • Separate Family and Business Roles: Clearly define family members’ roles within the business, ensuring that responsibilities are based on skills and qualifications rather than familial relationships.
  • Seek Outside Expertise: Engage external advisors to bring in professional expertise that complements the family’s involvement.

Conclusion

Planning for the future is an ongoing process that requires commitment, collaboration, and adaptability. Exceptional families use a combination of long-term goal setting, succession planning, adaptability, and a balance between family and business needs to ensure their continued success. The Family Council Canvas is designed to help families navigate this complex landscape by providing the tools and frameworks necessary for strategic future planning.

By following these best practices, families can create a future that preserves their legacy while allowing their business to thrive for generations.

Finally, an advisor to the family business needs to be aware of the stage within which the family and its business is and what the communication and delivery requirements of the family are.

Reference: 

Leenders, M., & Waarts, E. (2003). Competitiveness and Evolution of Family Businesses: The Role of Family and Business Orientation. European Management Journal, 21(6), 686-697. https://doi.org/10.1016/j.emj.2003.09.012.