Decision Making and Family Business

Successful business families make sound decisions. Such decisions could cut across all the major issues like planning business strategy, succession & estate planning, whether to sell or keep the business for the next gen etc.
If utilized effectively decision making would enhance the growth of the business. However, decision making is viewed as a mundane task and not as a dynamic tool to aid business.

Identifying the ideal decision making model can prevent many of the issues that arise in family businesses. There are times when unilateral decision making works best. However this may not be relevant under all circumstances.

Choosing the best option for making a particular decision depends on how important the decision is to the stakeholders; the amount of time available; the capability of the decision-makers; the potential of the issue to build a stronger team; and the significance of the decision.  When consensus cannot be reached and a decision has to be taken it may be common for the family business may resort to voting.

Decision-making by consensus within a family business system requires not only agreement about a definition of the problem and how to resolve it, but, eventually, agreement about the mission of the family and a shared vision of the future of the company. Families that have already built consensus about their core values and priorities will resolve future issues expeditiously because through hard work and commitment each step of the way.

As most families prefer the consensus route they have to develop the skills by building up the consensus process step by step.

A six phase model to reach consensus that can work well for family business comprises these factors:

  • Development of perception about the problem
  • Defining the problem
  • Analysis of the problem
  • Generation of alternatives
  • Evaluation of the alternatives
  • Final decision on the appropriate solution

In a complex family business system, major decisions will involve all three structures of governance - The Board of Directors/Advisors, the Management Team and the Family Forum. Each group may utilize different methods of decision-making to ensure effectiveness.

Family businesses that have survived over three decades have learnt the collaborative approach Vis a Vis the decision making process. If the senior generation can encourage the next gen members to bring out innovative ideas and adopt it after brainstorming there is a high possibility of the company sustaining success and growth across generations.

Share This:

Comments are closed.