Does it matter if you use a Vision Statement when you meant to use a Mission Statement? The answer is yes. As research has shown the importance of a family business having a strategic plan, it is equally important for the plan to include both a clear Vision and Mission Statement. Both statements serve valuable roles as the core element of the strategic plan.
A Vision Statement defines what the business hopes to be in the future. It provides guidance for a five to ten year period. It is written succinctly and in an inspirational manner that is easy for all family members, employees, and customers to understand.
A Mission Statement defines the present purpose of the family business. It usually answers three questions: What it does, who it does it for, and the company’s values and priorities.
The Vision and Mission Statements can be marketing tools as well because it announces your goals and purposes to your employees, suppliers, and customers.
It is never too late for a family business to define its Vision and Mission. In fact, some even reinvent themselves through the strategic planning process, which always should include well defined Vision and Mission proclamations.
I have often had the opportunity to serve family businesses where accountability is alive and well and the resulting culture of accountability provides a competitive advantage. Likewise I have seen plenty of family businesses where the lack of accountability is a perpetual topic of discussion, there are little or inconsistent consequences when people fail to deliver, and accountability seems like an elusive dream. Often family businesses that lack a culture of accountability also have contentious relationships which are a drain on both family and business energy and resources.
So what are some of the distinguishing factors for those family businesses where a culture of accountability is a reality?
Shared Values – Shared values are the foundational building block to accountability as they inform what attitudes and behaviors are expected and provide broad guidelines for family member interaction with one another and with the business.
Shared Vision – A shared vision provides a clear understanding of where both the family and the business are going and how one supports the other. A shared vision provides the context within which results can be gauged and is the connection to a purpose larger than any one individual. It is this connection that creates the incentive to contribute to the overall good.
Freedom of Choice – Accountability is built through freedom of choice to contribute on the part of the individual. Absent a voluntary choice to contribute, there are too many ways to blame others for behavior and results that don’t measure up. The motivation to be accountable is derived from the satisfaction of choosing to contribute.
Certainly articulating goals, roles, policy, procedures, consequences, etc. to provide additional clarity on expectations can be helpful to developing a culture of accountability. However, no amount of structure will substitute for shared values, a shared vision, and freedom of choice when it comes to making accountability an achievable reality in your family business.
I recently met with a family business owner who is quite open about the fact that he consistently pays his employees at a below-market rate. Given that he also makes great efforts to ensure that his company delivered the very highest level of quality, I questioned him about his low pay strategy.
I thought – somewhat naively, it would now appear – that higher quality demanded higher employee wages. He believed that low pay helped him to find the right employees for his company – those who would be dedicated, hard working, and have a strong belief in the company’s vision and mission. In other words, offering low pay – and having a reputation for doing so – provided his company with employees who weren’t working solely for the money. And, he believed, an employee who works for reasons other than just the money is an employee who will ultimately deliver higher quality.
While I remained somewhat skeptical, his argument did move me slightly because it reminded me of the common refrain about the low pay received by teachers. Even though all agree that teachers are so important, we, as a society, want them to be passionate about their jobs and to see their work as meaningful – not to do it for the money alone.
Now, there’s some research that further supports this line of thinking. The Institute for the Study of Labor (IZA) in Bonn found that relatively few workers are motivated by their organization’s mission, BUT those who are so motivated provide substantially higher effort AND receive lower pay. Granted, higher effort does not guarantee higher quality… but, I would suggest that it’s a good start.
Have you found a similar benefit of low pay in your family business? Or, are there other surprising benefits of low pay that you’ve seen?
Fear, Uncertainty, Doubt and/or Greed (FUDG) often play a major role in a family’s decision to keep or sell the family business. Managing these emotions in the decision can have a powerful impact on the success of the process.
Several steps can be taken to manage the first three elements of the FUDG factor to the extent needed to make an informed hold or fold decision. Educating family shareholders on the products, the competitive environment, and the challenges and opportunities of the business is a good starting point. Encouraging family members to be informed on business issues in general can also help those not in the business better understand the current and future business environment in which the company operates. If the company has embraced a comprehensive strategic planning process, management should be well aware of these subjects. The planning process should also clarify the company’s vision for the future and outline its plans to achieve that vision over time.
An outside board I worked with recently had a policy of asking shareholders to discuss and communicate to them their long-term vision for their ownership annually. This was done before the board reviewed and approved the annual revisions to the company’s strategic plan. Building value and growing the company were the focus for many years until the shareholders responded unanimously that they wanted to prepare the company for sale within a three to five year timeline. A successful, fully priced sale was accomplished in less than three years.
The Greed factor is a bit more problematic. There is a difference between greed and rational self-interest. The need for individual financial security may become a key driver in the decision process. The question that arises is “what is enough?” When that question cannot be answered rationally, an element of greed becomes suspect and may lead to conflict before, during and after a hold or fold decision is made.
Fear, Uncertainty, Doubt, and to some extent, Greed may always be present in one form or another in every hold or fold decision. The key to success, whether the decision is to hold or to fold, is to manage these factors effectively.
Over the years of my work with business-owning families I have had the privilege of collaborating with many successful individuals, whom I greatly admire.
There is the founder with an idealistic spirit, exceptional sales ability and sharp business instincts, whose greatest sense of accomplishment comes from never having laid off any employees – even in times of hardship. Though he is the sole owner of his business, he seeks input, truly listens and builds consensus with others.
There is the hard-driving leader who has built a business on the strength of her work ethic and determination to ‘do the job right.’ While she drives all around her hard – all are clear that she drives herself the hardest. Demanding and ambitious, she also mentors and develops all who come into her circle and devotes a tremendous amount of energy to her church and family.
There is the next generation young adult who always struggled in school yet persists to complete a degree, while working full time to learn business and develop more ‘practical skills.’ Not content to simply ‘fulfill the obligations’ of the family employment policy – he has worked for several years in a related business, developing industry contacts as well as knowledge he plans to bring back when he does eventually join his family’s business.
There is the second-generation leader whose intelligence and quiet resolve have allowed the business he owns with his brother to flourish where competitors have struggled. Though revered in his industry he shares the limelight and all ownership decisions with his brother, and has comfortably transitioned out of the leadership role.
The point of these stories is to highlight that there is no one path to success in a family business, or anywhere else for that matter. Sometimes we spend too much energy looking for ‘the formula’ for success – when in truth the search should be for your personal path. For the most part, when people arrive at success it is because they have a vision of where they want to go with their potential, and then put one foot in front of the other towards that goal. Make sure you are on the right path, because if you aren’t – no matter what you accomplish, you will not have achieved success for yourself.
One of the most basic dynamics we see in working with family owned enterprises is how people engage in similar process of making meaning of the world in similar ways. We each take in information, organizing into our own unique observations informed by our beliefs and experiences in a way that helps us make sense of the world. However, even though the process is the same for each of us, we are likely to wind up with varying differences of opinions on our individual “takes” to the same set of circumstances. Even though this is a normal process, it can result in conflict between family members.
But it doesn’t always stop there. People are prone to organize their individually constructed perspectives around others’ similarly held beliefs or actions: We tend to associate with the people around us that we perceive to be interpreting the world like we do. Being from West Texas, one of my favorite (and perhaps most extreme) examples of this dynamic was the creation of a community in West Texas designed expressly for supporters of the politician, Ron Paul. The goal of Paulville is “to establish gated communities containing 100% Ron Paul supporters and/or people that live by the ideals of freedom and liberty.” In 2008, the New York Times reported, “For now, the town is little more than an idea and a title deed…” and that is how it remains today.
In larger families – sometimes branches of the family or even just a couple of siblings – can come together with similar perspectives. This innocent, harmless and natural way of organizing can become detrimental when the notions around which these sub-groups of the family have formed are counter to the overall mission or vision of the enterprise or the family. These kinds of intragroup conflicts tend to be more complex and present a unique challenge to manage so they don’t become detrimental to the enterprise or, more importantly, to the family.
Over the last twenty-plus years of working with and observing multi-generational family businesses, three attributes common to the oldest, largest and best performing ones seem to present themselves repeatedly.
First – the family shareholders are aligned around matters of vision, purpose and expectations of each other and the enterprise. And, as often as not, they reach alignment through the use of family meetings or other such important forums for shareholder and family education, development, trust building and communication.
Second, the output of those family meetings – their vision, purpose, sense of unity, policies and agreements – these all serve as important contributors to strategy. The outputs inform management of what is expected of them and the rules they’ll have to play by; what some may call the non-negotiables.
Third, their values implicitly or explicitly include transparency, accountability, stewardship, outside input and a responsibility to others. These values usually guide them to establish appropriate and active governance – both for the family and the operating company.
At our website, www.efamilybusiness.com, you’ll find dozens of books, webinars and thousands of articles loaded with ideas about family meetings, governance and being an effective family firm shareholder.
If you and your family hope to create a lasting family legacy by passing your enterprise down through the generations, a family vision statement will help guide you in the achieving this goal.
What is a family vision statement? Most people are familiar with a business vision statement. It lays out management’s aspirations for what the business will become – what customers it will serve, products and services it will offer, markets it will operate it in, and at a higher level, what value it hopes to create. A family vision statement is similar, but its focus is the family, not the business enterprise.
The family vision statement answers these questions:
What do we hope to achieve as a family together?
What is the purpose of our wealth and what will we use it to accomplish?
Are there particular needs or expectations we have of the business?
What values do we expect to see reflected in the business culture?
Is our philosophy to put the needs of the business before the family, the family before the business, or balance the two?
What role do we, as family members, intend to play in the management and ownership of our enterprise?
Do we hope to stay together as a business owning family for generations to come?
What will our family’s legacy be – to our employees, our community, future generations of family members
The answers to these questions will shape both your family and your enterprise in the years to come. Many long-lasting family businesses come to see that the greatest advantage of being a business owning family is not the financial benefit but the opportunity to leave a lasting legacy. Without thought and guidance, your family will under-utilize this wonderful opportunity.
Where is your family’s focus? In the early stages of a family business, the family must focus its efforts on the success of the business. Second generation members often share that the business was the child in their family, absorbing all the time and attention of their parents. While it can breed resentment, this unwavering dedication may be required for the business to survive. And, for most families, the success of the business is imperative because it pays for their basic needs.
As the business becomes established and thrives, the success of the business will actually depend upon shifting focus away from the business. By no means do I suggest that the business should be ignored. Rather, the needs, expectations and aspirations of the family must be considered simultaneously with those of the business. Clarifying these needs, expectations and aspirations will actually contribute to the survival of the business.
How so? Once the business proves to be viable (e.g., it can attract customers, it can compete effectively, it makes money), family owners have the opportunity, or perhaps more strongly stated the responsibility, to set a long-term vision. This vision defines what they are in business to achieve, what parameters or constraints they will place on the business and what values they want it to represent, among other things. Articulation of a commonly held vision by the ownership group ensures that the family owners are aligned with the business. Without the owners’ commitment, the business is unlikely to succeed.
Think about where you are in your family business evolution and where you are focusing your attention? If you’ve gotten beyond the stage where the business requires 100% of your focus, maybe it’s time to start focusing on the family. Continue reading this week for more thoughts on creating a family vision.