To ensure survival in today’s competitive climate, you must look beyond the day-to-day and challenge tradition.
Most family business owners yearn to pass the enterprise down to future generations. But unfortunately, there is a disconnect between that objective and the most effective way of achieving it. Only about a third of family-owned businesses have a strategic plan. Despite their desire to sustain their businesses, these owners neglect to wield the very tool that is vital to building a company’s future. They don’t make the effort to maximize the probability that the business will continue.
Ensuring survival in today’s competitive economic climate involves managing the odds around peril on the one hand, and opportunity on the other. In this effort, strategic planning is an insurance policy no business should be without.
Strategy work is really more about execution and leadership than it is about the process of strategy creation. The strategic plan is simply a means to an end. In the case of family-owned businesses, that end is ensuring the longevity of the business and the legacy of the family.
One Family’s Experience
One of our clients, the HoneyBaked Ham Company of Ohio, is a third-generation business that recognizes the value of strategic planning. Harry J. Hoenselaar founded the company in 1957 when he patented the spiral-slicing machine. In the 1960s and ’70s, his four daughters and their families relocated to establish regional headquarters and open stores in major markets across the country. The second generation aggressively grew the brand through distribution. In 1981, as the patent on the machine expired, the family realized they needed to manage competition as well as a changing marketplace.
“We needed a strategic plan and an infrastructure that would allow us to respond to the changing business climate and proactively accelerate growth and awareness of the brand on a national basis while ensuring that the business would thrive into future generations,” says Hoenselaar’s grandson Craig Kurz, the former CEO. “At the same time, my cousins, aunts and uncles, who were operating the regional offices, were doing their own work of establishing a longer-term view of the business and building organizational structures to prepare for the future. These efforts allowed us to implement trackable, measurable initiatives around a long- term vision for the entire organization.”
The strategy process is built on the foundation of a compelling mission— a vision of the future’s opportunities and the company’s core values that keeps everyone in harmony and acting in a way that reflects the best of the company’s culture.
At HoneyBaked Ham, all team members are aligned toward a common vision. Their activities are interconnected and provide a measurable contribution toward that vision. “This does not happen by accident,” Kurz notes. “We work at it every single day. We have a set of core values that is extremely important to how we operate and how we interact as business professionals. All team members have a stake in the business.”
A strategy map outlines the game plan in a way that is understandable to everyone in the organization—and even felt at a visceral level. This map gets translated into the actual battle plan, which describes the initiatives, key metrics, accountabilities and cascading tactics that move everyone toward the vision.
A sound and compelling strategy is not pushed solely by the company founder or an executive team. The only certain way to deliver on a company’s vision is to have strategy carried along on the shoulders of everyone in the company. This is no small feat. “We have spent the last two years refining our vision and activities and are continuing to raise the bar on how we communicate and measure those activities through metrics and a balanced scorecard,” says Kurz.
Although strategy work has its nuts and bolts, it is not a mechanistic or linear process. Since it depends even more on execution than on strategy creation, people are the ultimate levers. While strategy creation may be driven by a leadership team, strategy execution requires the entire organization.
“Our commitment to our strategic planning process has resulted in measurable business improvement, which is always the end goal of strategy work,” says Kurz. “That’s when everyone, from front-line employees to leadership, realizes that operating with a plan, measuring outcomes and refining the plan are necessary to drive a business into multiple generations.”
Journey Into the Unknown
The very nature of family-owned businesses tends to encourage a focus on day-to-day tactics at the expense of systematic and disciplined strategy work. After all, it’s the operational side of the business—around its product or service—that the founder fell in love with in the first place.
Further, because family businesses are so tradition-bound, strategic planning can appear rather threatening because, by definition, it challenges tradition. Compared with everyday operations, strategy work can feel destabilizing. It’s a journey into the unknown, although more ostensibly than actually.
There are four countervailing forces (or non-rational drivers) that block strategy work:
The force of complacency: “If we continue to do what we’ve always done, we will continue to be as successful as we’ve always been.” From this perspective, the recipe for success is to keep one’s nose to the grindstone. But there is no greater threat to success.
The force of inertia: “Don’t move me out of my comfort zone. I have done fine here. I’m doing fine here, and I will continue to do fine.”
The force of over-control: A strong founder or owner who has made the business prosper in spite of hardships and challenges says, “I founded this business and I have taken it this far. I know what’s best.”
The force of conflict aversion: This is the force that holds back employees or family members who see the owner’s battle scars and medals. “He’s got the combat time,” they think. “It’s not right for me to challenge his authority on how to take this business to the next level.”
In short, emboldened by the feeling of certainty and pride that stems from success, family business owners tend to stick to the business model and core operational processes that have ensured profitability and helped them overcome challenges in the early stages of growth. It’s like a security blanket that offers a sense of predictability in a business world that is loaded with unknowns. But change in the business world is inevitable, and the company stakeholders must develop a plan to manage it.
The Best Insurance
Driving the business strategically is as critical as any other form of risk management in a business owner’s portfolio. Strategic planning protects the business and the owner’s family against future unknowns. As a fundamental tool for managing the business and transitioning it from one generation to the next, strategic planning delivers much more than any other insurance policy, yet it is significantly less expensive. Better yet, control of this risk management tool rests solely in the hands of the owner, not some faceless insurance company. What more can a family business owner ask for?
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