The challenges of long-term planning in a family business environment

By Ron Price

Long-term planning can be a challenge for any company, but family businesses have their own unique set of obstacles when it comes to making plans for the future.

A long-term business plan is both worth the work and critical to continued success. The planning process provides an opportunity for family businesses to become more intentional and principle-driven.

Communication becomes more important (and more difficult) for each succeeding generation, usually because of the growth of the organization. The larger a family business becomes, the more important it is to nurture, protect and direct the culture. This is achieved proactively through well-articulated core values, clear direction about strategy and regular reviews to compare company performance (both financial and non-financial) against agreed-upon standards.

Even if internal or external factors change significantly enough to challenge the relevance or potency of the existing plan, having a well-thought-out plan in place creates the context and stability necessary to navigate the new factors and adapt accordingly.

Critical for sustainable growth

Long-term planning is necessary to protect the family and business assets, both tangible and intangible. Tangible assets are the financial assets of the business as well as real estate, equipment, infrastructure and so on. The intangible assets include intellectual property, loyal human capital and, maybe most important, the unique culture. All these assets have been built over time (usually decades), and their value can be protected and increased through quality long-term planning.

In one third-generation family business, for example, multiple legal entities had been created over the years with assets worth hundreds of millions of dollars, accumulated over many decades. Without careful long-term planning, including estate and governance planning, events such as violation of legal guidelines, risks to the estate and inappropriate taxation could threaten these assets.

Most family businesses have tremendous amounts of experience and wisdom gained through organic growth over decades. Long-term planning helps to document this wisdom from the past and translate it into lessons for the present, to create a more intentional and sustainable future.

Overcoming the challenges

Family conflicts can layer a distinctive set of complications over the long-term planning process. The three most common family challenges are:

• Separating family concerns from business concerns (both are valid, but must be recognized as such and not intermingled).

• Helping family members understand their professional potential and pursue the "best version of themselves" regardless of where they fit on the org chart (making performance and satisfaction more important than rank).

• Professionalizing the business in its approach to talent, strategy and performance.

We recently worked with a client who had family members without current involvement in the business and family members in the business who were underperforming. Establishing three distinct governance bodies helped them separate the concerns and deal with each set of interests more effectively.

The organization began by clarifying and solidifying its management structure. There was a need for more specific role clarity and performance management standards throughout the management team. The focus of the team was on business performance and direction, without getting caught up in specific family concerns.

Next, the family reached outside to build a board of advisers. The role of this group is to review and question management's business plans (short-, medium-, and long-term), to assess organizational performance against the plans and to provide advice to the CEO. (Many families who initially form a board of advisers eventually make the shift to a board of directors. While a board of advisers is a consulting body, a board of directors has voting authority and oversight responsibility.)

Finally, a family council was created. This provided a way to keep family members outside the business informed about the health and performance of the organization, while warding off meddling or special-interest interference in the business. It also provided opportunities for non-business family concerns to be voiced and addressed.

The development of individual family members is often a critical part of the long-term planning process. Family members who aspire to join the company or serve on the board may receive special coaching or development opportunities, often through the family council.

Keys to success

The challenges of long-term planning can be overcome with an objective and proactive talent management strategy, assessing those inside as well as outside the family who are the best fit for key positions. The talent management strategy should include the following:

• Clarification of roles in the family and the business.

• A dynamic performance management system that focuses on leaders as coaches.

• A way to measure performance.

• Professional development that is specific to the business and key positions within it.

• Cleanup of sensitive governance issues involving family members and key staff who have been with the business for decades.

Leaders must also hunt for waste that may result from the tendency to keep doing things the way they have always been done. Improvements can be achieved through process mapping, identification of bottlenecks and redundancy, and overall systems thinking.

Innovation is essential for long-term business sustainability. Business models, markets, organizational structures, product mix and distribution channels should be reviewed with an eye toward developing strong, executable innovation strategies.

It is important to focus on getting better, not on being perfect. Some will get bogged down in creating the "perfect plan" and will never get around to making changes. Others, who are anxious to start implementing, will be bored, disengaged or hostile during the planning process. Part of the leadership challenge is to help people organize around their strengths and neutralize their weaknesses.

Contents of the long-term plan

A long-term plan should include a clear statement of the company's mission, vision, values and objectives. What do we want our company to be known for in the marketplace in ten years? How do we want our employees to describe their experience in ten years?

The plan should include an analysis of strengths and weaknesses in the organization's current leadership capacities, strategies, market position, performance, financial standing, legal integrity and governance effectiveness.

Third, the plan should contain an overview of the external threats and opportunities in the marketplace, including societal and marketplace trends, a competitive analysis, a description of the company's brand or reputation, and a review of current and potential strategic partnerships.

Finally, it should include an operating plan, with detailed forecasts. The size of the business and the challenges it faces will determine how complex the plan should be.

In the more proactive cases, there is a calendar for annual and long-term planning, enabling the team to schedule the work that must be done throughout the year to review current progress and prepare for future planning.

There is a window of time for completing an initial long-term plan, which varies from business to business. If the planning process is drawn out too long, the organization gets "planning fatigue" and loses interest and commitment. On the other hand, if the planning process is not comprehensive enough, the plan will not reflect team members' day-to-day reality, also resulting in a loss of interest and commitment. Understanding these factors and the energy of those involved is one of the key success factors.

Sources of help

Companies may find that the long-term planning process is more work than they can do themselves, because family relationships get in the way, an objective assessment is needed or the scope of the project is simply too broad.

Professionals who can assist in the process include a business strategy adviser who can facilitate conversations with company leaders, an estate attorney well versed in managing complex family holdings and an accountant experienced in long-term planning.

Getting the family on board begins with a full commitment to the process from the top of the organization. Engagement is then built throughout the company by seeking input and including team members' insights, concerns and recommendations when appropriate.

Keep it up

Long-term plans should be reviewed regularly. Management guru Peter Drucker often commented that one change in external factors could suddenly render the best long-term plan irrelevant or off-track. The review should also assess whether agreed-upon changes have been executed and track effectiveness in delivering the desired results.

Conducting regular reviews provides a great opportunity for business leaders to learn how their decisions are playing out. This information will be essential for the development of long- and short-term plans going forward.

Ron Price is CEO of Price Associates, a global leadership performance firm ( He is the author of five books, including The Complete Leader: Everything You Need to Become a High-Performing Leader.

Copyright 2015 by Family Business Magazine. This article may not be posted online or reproduced in any form, including photocopy, without permission from the publisher. For reprint information, contact

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