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.
In order for a family business to survive beyond the current generation in today’s fast churning economy, a well-developed strategic plan would be greatly beneficial. Conceptually, a strategic plan is relatively long range, from three to five years on average.
The term Strategic Planning typically refers to the process of developing business goals and provides a detailed road map of how to achieve those goals. It facilitates communication among family owners, Board of Directors, management and employees.
Perhaps most importantly, strategic planning provides a framework to help guide decision making and how to make the business profitable and sustainable. It also challenges past business practices and opens the way for choosing new alternatives.
The result should be a well thought out written document that includes a business Vision and Mission Statement. It needs to include a time frame in which goals hope to be accomplished and designated individuals who will be responsible for meeting those goals.
Carlock and Ward (1) discuss the importance of having a parallel process. This means there should be a strategic plan for not only the business itself, but for the family members as well. This parallel planning will help unify the business and the family.
A strategic plan is not set in stone and should be revisited annually and revised according to current circumstances.
Strategic planning can be the key to unlocking the door to making a family business successful. Research has shown it to be one of the three most important factors of family business sustainability. The other two factors are holding regular family meetings and having a Board of Directors.
(1). Carlock and Ward (2001), Strategic Planning for the Family Business, Palgrave Macmillan.
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.
While we who follow Family Capitalism have long believed the public markets punish long-term strategy, it’s now been proven by research at the Bank of England. An article in The Financial Times (May 23, 2011, p 11)by Richard Lambert, Chancellor of the University of Warwick, reports that, based on research, “investors place irrationally low values on the relations from long-term projects.”
The article cites as an exception Rolls Royce and its 30 year investment in jet engines. But the explanation is interesting: Rolls Royce has a “golden share” owned by the government to protect it from short-term shareholder takeover. As business families know, ownership control makes long-term strategy possible — and profitable.