Start strategic planning now

Professional businesses take it as a given that strategic planning is necessary. But many family businesses refuse to do so. Most do not want to reveal confidential information to professionals, even to the younger generation.

“As head of the marketing group, I need to know the mission for the next five years, so that I can plan accordingly,” says a family business retail group vice president, a non-family professional. “But when I ask for the figures, the family does not want to reveal anything. I am frustrated. Instead of planning ahead strategically, I react instead to the market. Then I get blamed.”

Some businesses do not want to plan far ahead, for fear it will make them less flexible.

“My boss, the CEO, does not want to plan in much detail, because he says plans often change,” says a family food business vice president in charge of operations. “My boss is a visionary. He started the company from scratch. His intuition is good. We respect him. But he is getting older, and frankly, his sons are not as good as he is. My boss does not tell us what he thinks. He does not even tell his sons what he really thinks. He just expects everyone to improve the bottom line, and he gets mad if we lose money.”

Some founders do not like strategic planning, because decision-making may have to be shared.

“The boss is very good, but he is a dictator,” continues the operations guy. “During board meetings, he presides over everything and even if his sons make suggestions, he does not heed them. All major decisions are made by him. Even if he makes mistakes, he does not admit it. He does not want to share power. Once, we did some strategic planning because we were starting to lose market share. Instead of encouraging us to do it, the boss said we were wasting our time.”

Other family businesses refrain from strategic planning because members do not get along. They want to avoid family conflict and do not want to reveal past mistakes.

“How can we plan?” says the third-generation manager of a textile business. “My parents, uncles and aunts do not get along. When Lola was still alive, she managed to keep the family together and the business running, without strategic planning. When she died, the second generation started quarreling so much that one day, they all just agreed to not talk about problems. On the surface, everyone is civil, but they blame each other for mistakes. If ever we are to start with strategic planning, it will have to be initiated by us, the third generation. But family skeletons might come out, and we don’t know how to deal with them.”

When the company grows

Many family businesses start out to survive. In do-or-die situations, it is not hard for family members to be committed to the cause. They work hard and do not expect high pay. They respect the founder, and follow his decisions. Consensus is easier to achieve.

Founders control the resources and involve themselves in daily operations, acquiring hard-won knowledge and experience to become effective, though often, dictatorial leaders. But since they are highly dedicated and capable, they tend to get their way, and the business expands. Trust is high among family members, especially towards the founders, so there is not much conflict.

“We were too busy working hard to indulge ourselves in quarrels,” says a founder of a manufacturing firm, and he is right. If ever conflicts happen, the leaders usually resolve them easily.

But when the business grows, things become different.

“Information asymmetry begins to emerge,” say Jakarta consultants A. B. Susanto and Patricia Susanto in their book The Dragon Network, “which makes it difficult for family members [and even non-family professionals] to get necessary information in the same degree to make the right decision.”

To continue functioning well, the family business needs to plan wisely.

“In strategic planning, an organization defines its strategy and makes decisions regarding resource allocation to implement the strategy. The company must predict the future, supported by adequate data and thorough analysis. For the family, strategic planning will drive commitment, develop business knowledge, and serve as a means for younger generations to learn about the business. [It] will help [everyone] reach common understanding regarding the surrounding environment [and] reveal the soundness of the business.”

Next Friday: Understanding envy

(Queena N. Lee-Chua is on the board of directors of Ateneo de Manila University’s Family Business Development Center. Get her book “Successful Family Businesses” at the University Press [e-mail [email protected]]. E-mail the author at [email protected].)