Family enterprises (the umbrella term to describe a family and all its entities – most simply a family and a business) generally operate with 1 of 4 mission statements. Mission statements matter because they form the bedrock framework by which the family will make its critical strategic decisions. Our goal today is to unpack each of those four and outline key considerations of each.
Mission Statement 1: The family business provides for the family.
Statement number 1 is the most common mission statement for an entrepreneur. While the business may have its own mission statement to serve a certain customer or impact the world in a certain way, when considering the intersection of the business and the family, the business exists to provide for the family’s financial needs.
An entrepreneur is faced with many possible career options, but whenever someone chooses to start a new venture, the implication is that the venture will be able to produce an economic return necessary to support the entrepreneur. Ventures that do not produce economic returns are best considered charities or hobbies. That is not a value judgement, instead a reflection of simple economic reality.
In this stage of the family’s journey, the business often is considered something entirely separate from the family. It is something that mom or dad works on, but it is their project, not a project for the family.
Mission Statement 2: The Family provides for the business
For some families, there will be a shift where the business evolves from an affair occupying the attention of a single family member, to something that that engages the broader family group. When we look at how the family provides for the business – the most common type of ‘provision’ delivered is the leadership / management of the business.
There may be a host of different reasons why the business moves from an individual affair to a family one:
• Future generations see the business as aligned with their own professional interests and wish to contribute
• Crisis occurs and family needs to step in to manage a succession issue – ala Kay Graham and The Washington Post
• The founding generation encourages (can be light or heavy-handed) future generations to participate
• Limited economic mobility or access means the family business is the best professional option
Mission Statement 3: The Family preserves the business
Mission statement 3 is a sentiment that occurs in some families once they start operating from a Mission Statement 2 framework. In this Statement 3 missions, there is a shift from the family providing management services to the business, to the family being the only group capable of keeping the business afloat. While this sounds like semantics, it is an important tonal shift that can have dramatic implications.
First, there is a sense of a savior complex that can emerge in the family. No one else can run this business and so the family must be the one to step in. For some families, this will be a heroic sense of rescuing the business. For others, it will be done so grudgingly, as if the family cannot extricate itself from the day-in and out involvement in the business.
If the family is the savior/manager of the business, they are likely to be averse to having outside advisors or outside board members involved. Common attitudes may include a skepticism that outsiders have anything to add about a business they are not capable of understanding. As well, if the environment is changing around the business, the family’s desire to preserve things – “the way they’ve always been done” – may hinder the business adapting to a changing marketplace.
Operating under this mission statement is risky. Preservation of inanimate objects is a key concern for art, collectibles, etc. And certainly, objects operating under a preservation ethos can increase in value. But there is a growth and dynamism that is lost which is inherently fragile. This approach will work until it does not – and that transition can be abrupt.
Mission Statement 4: The Business preserves the family
In this mission statement, the business has again shifted its focus to serving the family (vs. the other way around). Importantly though, the business is no longer tasked with just providing for the family financially, but for preserving the family into the future. Families in this camp begin to see the goal of their working together is the continuation of the family over time. Common refrains here are we have shifted “from a family-owned business” to a “business owning family.”
Here business assets are just that – assets. The family evolves to taking more of a portfolio approach to its business interests and may choose to sell (aka harvest) some investments, while at the same time, make new ones. This economic activity provides a reason for the family to stay connected through the shared ownership of assets. As well, the financial success generates the money necessary to support the broader extended family staying involved socially in each other’s lives through things like regular family meetings.
So, are there better or worse mission statements?
Yes and no – each may be appropriate at different points in the family’s journey. Often, families may move/evolve through the statements linearly. Statement three is the most potentially dangerous of the group. I would argue that a thoughtful Mission 2 is far preferable to a stagnant Mission 3. A select group of families will begin to consider a Mission 4 approach to their affairs. These missions can be compelling, but entail both a tremendous amount of effort, and a willingness to reconsider past norms of behavior that may no longer be relevant (aka sacrificing a few sacred cows)