What two words come to mind when you think about a successful family business?
Is it: Financial Capital? Location? Customers? Leadership?
There are many factors that contribute to the overall success of a family business, but there are two critical components that impact the long-term direction and the long-term viability of a family business. These two are: Common Goals and Shared Values.
In an international survey of 336 middle-market family firms, “nearly three out of four senior level family member executives reported that there are clearly identifiable family values determining the way the business is managed. Moreover, nine out of ten of these family members say that these values were crucial to the economic success and other achievements (e.g., charitable efforts) of their family businesses.” Russ Alan Prince, Forbes.
Common Goals and Shared Values answer two most critical questions for every family business. Common Goals answers the WHAT question, and Shared Values answers the HOW question.
Common Goals: WHAT our business is about
As a family business owner, you know that setting and working towards common goals is important, but do you practice this knowledge on a day-to-day basis in your business?
According to the recent National Small Business Survey, 80% of business owners admitted that they don’t keep track of their business goals and 77% of them say they have yet to achieve their vision for the business.
Because family businesses can have so many competing agendas due to family members having slightly different ideas about the business, setting Common Goals that every family member can get behind is very important. Common goals help not only define the nature of the business for every family member, but they also help set clear deliverables, define long-term success, and help every member measure success.
Having Common Goals does something else for the family business. When mission creep occurs, when new “shiny” opportunities emerge, Common Goals give everyone a grid by which to assess those opportunities and determine whether they are in line with established goals and objectives, or whether these new opportunities would be taking the business off track. Common Goals are a great way to settle what business we are in and what business we are not in. Being clear on what we don’t do is as important as clarity on what business we are in!
Here are a few basic rules for setting Common Goals for your family business:
Write Common Goals Down on paper
Ask every family member to sign and date Common Goals document
Establish clear guidelines for reviewing Common Goals. It could be done quarterly, once every 6 months, whatever suits your business
Establish clear communication regarding progress on agreed Common Goals
Establish clear guidelines for adjusting or even changing goals based on new data or other major shifts in economy or business environment
Shared Values: HOW we conduct our business
Strong, shared values are foundational to operating strong family business. According to Daniel Geltrude, Managing Partner of Geltrude & Company and Director of the firm’s Family Office Practice, “In many of the family businesses we work with, including the extremely wealthy ones, values play a very important role in the strategies of the firms and how important decisions are made. They’re the principals upon which these affluent, successful families run their lives and their companies.” Russ Alan Prince, Forbes.
Successful businesses recognize the importance of setting and living according to shared values. Based on the above-mentioned survey, “of the 197 senior level family members identifying the importance of the family’s values in managing the company, nearly 90 percent of them reported that it is very important to transfer these seminal values to the next generation.”
Respondents also expressed strong feelings about the fact that if family members refuse to embrace these shared values, they should not be in leadership roles in the family business.
Values are critical because they set the tone for how we conduct our business. Values can dictate how we will treat our employees, our vendors, customers and even our competitors!
Values can outline ethical boundaries of our business, who we will and won’t hire, how we will let employees go, what business practices we will and won’t engage in. Values are really the heart of every family business. So, what are basic rules for setting strong, operational values for your family business?
Set values that are concrete and that reflect specific business objectives
Set values that reflect personal values of every family member
Ask every family member to live out our agreed upon values
Set operational principles around every value in order to illustrate how each value can be lived out
Establish a clear process for evaluating how values are being lived out by each family member
Establish a clear process for confronting one another when values are being neglected or violated
Wondering what tangible, operational values sound like? Here are few examples:
Leaders start with the customer and work backwards. They work vigorously to earn and keep customer trust. Although leaders pay attention to competitors, they obsess over customers.
Bias for Action
Speed matters in business. Many decisions and actions are reversible and do not need extensive study. We value calculated risk taking.
Accomplish more with less. Constraints breed resourcefulness, self-sufficiency and invention. There are no extra points for growing headcount, budget size or fixed expense.
When Common Goals and Shared Values are established and lived out by every family member, odds of long-term success are in your business’ favor!
Clarifying the WHAT and the HOW for every business, will make it much easier to make tough calls, get behind opportunities, say no to unnecessary mission creep and maintain peace and unity on both a personal and a business front.
If your family business needs help crafting long-term goals and strong, operational values, we'd love to help! Simply contact us at firstname.lastname@example.org and let us know your specific need.