Being tactically savvy requires a clear understanding of how and why you are where you are, as well as who and what are going to get the family, the business, and the owners across upcoming chasms. The tactical meta-framework considers all of this…and more.

Family Enterprise Heterogeneity Frameworks

The family enterprise heterogeneity framework is actually the focus of a previous book I wrote with Professor Emeritus Ken Moores, Leading a Family Business: Best Practices for Long-term Stewardship. The framework is divided into two sections. The first is an organizational level and looks at that which distinguishes family businesses from other businesses in terms of their architecture, governance, entrepreneurship, and stewardship. The second section takes an individual level of analysis and describes the individual as a steward, an architect, a governor, and an entrepreneur (Illustration 19).

Let's summarize the components of the organizational level. Architecture, in this case, refers to the structures and systems in place to deliver the agreed-upon strategy. The core message here is that there is no point in developing a strategy unless it is consistent with the ability to implement that strategy through the appropriate structures and systems. Structures frame the organizational design, supporting the processes needed to create order and to carry out organizational tasks. Structures dictate (i) organizational activities, and (ii) the authority and autonomy of those individuals or groups designated to undertake these various activities. Management control systems include the protocols within firm structures that help deliver the strategy and include, for example, means of dictating how strategic planning is conducted and how other systems are introduced and operationalized idiosyncratically in the firm. Strategic planning systems are perhaps the most important systems an organization can implement. Put simply, a robust strategic planning system enables the firm to formulate strategies and action plans that will help it achieve profitability and sustainability.

The governance dimension of the framework's organizational level is built on the idea that there must be concurrent focus on business governance and family governance. This will be dictated by the organizational life cycle of the business and the generation of the family. For the family determined to continue, governance is a means to protect the family wealth and preserve the family legacy, for generations to come. Governance systems are used to direct and control an organization for and on behalf of the owners. They are built upon an interlocking framework of rules, relationships, structures, systems, and processes within and by which organizational authority is exercised and controlled. Understanding the unique governance dynamics of family business requires distinguishing between business governance and family governance.

The entrepreneurship dimension considers the need for entrepreneurial leadership and entrepreneurial strategy. To understand and explain entrepreneurship in family versus nonfamily businesses, the concept of entrepreneurial orientation (EO) is useful. The EO construct has five main dimensions: (i) innovativeness, (ii) proactivity, (iii) risk-taking, (iv) competitiveness, and (v) autonomy. Innovativeness is a firm's tendency to engage in and support new ideas, novelty, experimentation, and creative processes that result in new products, services, or technological processes. Proactivity refers to the propensity to compete aggressively and proactively with industry rivals. Risk-taking is about the tendency of a firm's top management to take risks related to investment decisions and strategic choices in the face of uncertainty. Competitiveness refers to the capacity to respond to market pressures. Autonomy relates to the intentional focus on remaining distinctive.

The stewardship dimension looks at the stewardship climate of the organization and stewardship orientation of the individual or family cohort. Stewards are intrinsically motivated, use personal rather than positional power, and see the business as an extension of themselves. They develop family and business climates that are identifiable through their collectivist culture, low power distance, and involvement orientation. They are the polar opposites of the corporate psychopaths earlier introduced. Recall that stewardship theory is one of the keystone theoretical approaches.

At the individual level, the steward is paramount to continuity. The architect concept depicts the leader as someone who understands the need to introduce appropriate structures, particularly during times of transition. The governor is well-equipped to take on governing roles both in the family and the business, and the entrepreneur understands that entrepreneurship, really, is that which will enable the enterprising family to continue differently.

Four Rs Framework

When the family enterprise member who introduced me to the four Rs framework told me that 90% of his angst related to family members went away when he committed to populating the four Rs matrix, I knew it was something that I needed to understand and share. Like many of the 20 other frameworks in this book, the 4 Rs framework is simple. It's fundamental. But like many of the others, it has been overly complicated, often appearing in books or research articles in an unnecessarily convoluted form. That's not meant to be disparaging, but rather to reflect reality.

I encourage you to draw and eventually populate the four Rs matrix, in keeping with the broad theme here of using simple frameworks to make complex conversations easier. It is also a good answer to offer people who are beginning a governance journey or tasked with writing a family protocol or family constitution, when they inevitably ask, “Where do we start?” A good place to start is by populating this matrix. Getting together and understanding that there are different perspectives, becoming accomplished at hearing other people's perspectives, and coming to some sort of consensus is fundamental to the skills and mindset required to build a continuity model. The four Rs framework helps you do this efficiently and effectively.

The four Rs consist of role, requirement, responsibility, and remuneration. These form the first row of the matrix, as labels. The first column of the matrix (i.e. role), is driven, not surprisingly, by the three circles framework in that the roles of focus are owner, director, executive or employee, and family member.

With four roles broken into three dimensions, the 4 Rs framework has 12 cells to populate (Illustration 20). Populating these cells looks simple but isn't, if done carefully and well. Populating them intentionally, authentically, and consultatively will require commitment to process and intuitive tweaking. It takes time, as each of the open cells requires robust debate. There is no one way to go about this. Some who have governance structures in place find that this is a good exercise in helping them to, in one simple matrix, replicate their full constitution, protocol, or subsections of those documents. Moreover, it is a worthwhile endeavor for siblings commencing the governance journey. It is an even more worthwhile endeavor for a cousin consortium charged with writing and/or championing a family and business governance agenda.

The example provided in the figure gives you one way to consider populating the cells but is by no means the only way. The key is to make it simple. The optimal approach is to have the detail in some other document, while filling in the matrix to be readily producible and replicable. The real test, as with most ideas here, is to be able to tell the story on a napkin.

When asked “For whom is this framework useful?” the answer is easy. Pick a stakeholder and you will immediately see why having a simple, populated four Rs framework will benefit their understanding. For example, a person recruited to join a family business in an executive role may think that its family-owned nature will mean a deficit of role clarity. Put them at ease by reproducing or sharing with them the completed four Rs framework. Similarly, a potential director asked to join the board, whether a well-established or nascent board, will appreciate, upon being shown the four Rs, that there is an effort to ensure that family roles are understood and that the potential for tension or conflict due to family involvement or meddling is reduced through better understanding of the roles people play. For affines, this tool is critical as they need to understand that there are specific roles and activities they can and cannot engage in, particularly those related to ownership if ownership is for bloodline family members only. It is also useful for next-generation members who need to know the expectations set for them about joining their business. They will benefit from understanding this at an early stage. Many see a role in the business as a birthright. Using the four Rs to explain to them that a role as an employee or executive comes with requirements, responsibility, and appropriate, market-set remuneration, helps to professionalize and enables them to strategize their way forward in a manner consistent with continuity.

Overall, the four Rs, simple in its appearance but complex in its development and implementation, is as important as any of the other frameworks introduced in this meta-framework; it has relevance to all concepts here and is fundamental in developing the full plans that will be introduced as part of the Continuity Canvas. Thus, working seriously on the population of this matrix is a primary first step in the development of your canvas.

Four Strategy Dimensions Framework

Strategy is a big topic, and strategic planning is one of the four plans that make up the Continuity Canvas. The four strategy dimensions included in Kaplan and Norton’s balanced scorecard approach provide an effective way for anyone involved in family enterprise to understand the vast strategic management and strategic process conversations required. Library shelves are jam-packed with information about strategic management. Office buildings are full of consultants well-equipped and eager to develop and help implement a strategic plan. Reviewing in great detail what these books say and what these folks do would waste valuable space here.

Much more important is to consider what strategy is and how it manifests. Simply put, strategy is understanding where you are, where you want to go to, and how you are going to get there. The balanced scorecard approach has as its center the vision and the mission of the entity. The four dimensions of the scorecard are customer perspective, financial perspective, innovation and learning perspective, and internal business perspective. For each of these perspectives there need to be established objective measures and targets; typically, there are three objectives for each of these perspectives. The objectives begin with the word “to” written simply so that everybody can understand what it is they are required to do. How those objectives are measured needs to be established so there is clear and articulated accountability for each of the three objectives and the targets will be agreed-upon performance metrics, which also indicate who is going to do what. The beauty of this approach is that it looks fundamentally at lead indicators, but the other key distinction of this scorecard or any scorecard that you elect to develop is that it enables a lot of information to be shared efficiently and evaluations can be made on an ongoing basis whether objectives are missing. As well, each of the objectives articulated have direct links to the vision and the mission. So, the scorecard is a valuable management and measurement tool that ensures that what counts gets counted; in continuity modeling it's closely linked to strategic planning. The scorecard is not negotiable and must be treated as a priority. Later, we introduce the concept of a quadruple bottom-line scorecard to capture the focal dimensions of continuity (Illustration 21).

A related conversation centers on decision-making. A useful way to consider how better decisions are made is to consider that most if not all begin with a thesis, i.e. a worldview, a conjecture. The complementary opposite is the antithesis whereby alternatives are considered. With both tabled, a decision is arrived at by the synthesis of the thesis and the antithesis.

The antithesis should throw up alternatives and a recommendation will emerge. The quality of this process is dependent on the pundits, particularly those involved in the antithesis brainstorm. An interesting view on this is offered by those who study what is referred to as disinterested dialogue. They claim that, while typically a great deal of time is usually spent in the analysis phase of a key decision, from the collection of an extensive amount of information, to its financial analysis, to the construction of projections about future scenarios, internal and external analysts often engage in collecting and analyzing evidence compiled in thick reports. However, very little time is spent on the art of constructing stronger approaches to discuss the evidence collected and its analysis, entering into a candid dialogue about the assumptions behind the projections, and possible alternative explanations and options (i.e. antithesis and synthesis). Of course, a robust analysis (i.e. thesis) should also test assumptions, alternative explanations, and various options. However, studies suggest that this is not sufficient for an effective decision; teams of executives that engage in a disinterested dialogue of the decision are more likely to perform these tasks than to simply rely on the analysis itself. Disinterested dialogue is defined as a fact-based and transparent dialogue about the analysis performed that addresses the major uncertainties of the strategic decision as part of the companie's existing portfolio of decisions. Common sense would also suggest that groups with multiple areas of expertise and experience are better positioned to perform the type of reflective judgment required to build an appropriate antithesis. In fact, during disinterested dialogue, individuals have the opportunity to place their knowledge into a broader context and are less likely to overvalue their prior experience; they are also more likely to engage in critical thinking by questioning assumptions, evaluating evidence, and testing the logic of ideas, proposals, and suggested course of actions that are part of strategic decisions. It is this process that is a key distinguishing factor in how successful multigenerational families in business make decisions differently.

In other words, a thesis is established using “robustness of analysis” construct, an antithesis is developed using “disinterested dialogue” measures, synthesis is the result of decision-makers blending the thesis and antithesis, or what could be termed “negating the negated.” The broad argument is that families have different decision-making processes due to the influence of the dual, independent and interdependent, family and business systems. Decision-makers charged with continuation-related decisions in family firms are influenced by family-linked idiosyncratic factors. Included in these are such factors as founder centrality, family involvement and influence, time horizons, balance sheet considerations, risk profiles, debt attitude, financial and non-financial metrics, as well as stakeholder relationships that would differ from the norm. The specific argument is that decision-makers, charged with managing family and business systems concurrently, develop their thesis (measured by the degree of robust analysis) differently, which would reason that the challenge (i.e. the negation) to the thesis, the antithesis (established by measuring disinterested dialogue) would also be established differently, and as a result “negating the negated” (i.e. synthesis) would result in different (not necessarily better or worse) outcomes.