While we are still in the early part of 2016 and resolutions are top-of-mind, I am excited to introduce a new column on family strategy. After all, what better resolution than to refocus your family’s strategy? This column will explore the non-financial aspects of family wealth. For this inaugural article I will offer a framework for how a family can approach creating and building wealth.
When you think of your family, mission statement and strategy are probably not the first terms that come to mind. But, as I explain in my recent book, The Business of Family: How to Stay Rich for Generations, when families are organized with a business mindset, parents set up their kids for future success.
I've found that families who truly understand wealth tend to invest in their families with as much discipline as they do with their business.
Here are five strategies for your family to use to create and keep prosperity:
1. Come up with a Family Mission Statement.
Business leaders know that if they don’t deliver on their promises, they’ll lose their customers. A family that wanders off course runs the same risk with even greater consequences.
Starting with a clear mission is the first step for businesses and families alike. A mission statement can be accomplished with just one sentence. Here’s an example: “The mission of the Smith Family is to keep our family connected, be grateful for our good fortune, and share it with others.”
Just like a business, create a vision for your family that strikes a balance between staying rooted in your principles and planning for future success. A written mission statement is the touchstone that connects the two.
2. Determine Your Values and Lead with Them.
Values are guiding standards that act as a compass for how people behave. This is true for members in a business or in a family. When standards are clear, the family will not only weather a storm, it will grow stronger because of it.
Smart businesses make decisions with values up front; families should do the same. If a family believes that generosity is high on its list of values, its mission statement should say that members want to share their wealth. Then, the family should develop a strategy for giving to a cause they find important.
If family members believe that being open and honest is important to their future success, having a process encouraging good communication is essential.
The key is to open up a dialogue to discuss the family’s principles so members remain connected and inspired. Being clear about values makes it easier to navigate the inevitable twists and turns on any family’s path because you’ve identified what’s most important to your family.
3. Get Input from All Family Members.
Like a business, a successful family is all about its people—who require training, support and commitment to a purpose. They need mentoring to meet unexpected challenges and rewards to celebrate successes. These are investments in the family’s human capital that are more than paid for by ensuring the next generation’s success.
Hosting frequent family gatherings creates strong relationships that keep the family connected. Families need to work together to discuss values, set financial goals and establish a shared vision for the future.
Family discussions are necessary for fiscalstrength. And a family strategy requires input from all its stakeholders—its members—in order to be optimized.
4. Set Goals as a Team.
Laying out goals and objectives is standard operating procedure with any business plan. The same ought to be true for families.
Wise families decide jointly what they want to accomplish financially and personally and then set about doing so as a team. Determining collective goals keeps people focused.
Seeking wealth for its own sake ultimately proves to be a hollow ambition. It’s what is accomplished with the money that provides lasting satisfaction. This means part of every family’s strategy must be choosing the things the family wants to focus on and working together to reach those goals.
Just as a business that starts without a plan won’t be a business for long, families who set a plan can achieve fiscal strength. A company needs a dynamic vision to be competitive in the marketplace and, similarly, a family vision keeps everyone working together.
5. Strategize to Optimize.
Good strategies are essential to achieving goals. So figure out: where should your family’s energy be focused? How should its resources be allocated? What are the barriers?
Reaching family success is a campaign of the highest order, so it needs a plan, a staff, a timetable and markers along the way. New approaches are often needed to reach a lofty goal.
At home and in business, it takes courage to plan for the future. Companies and families can be tempted to cling to old ways, but holding on to short-term profits instead of investing in long-term gains is a hazardous strategy for both.
Although most of us don’t have a strategy in mind when we start our families, it’s precisely what we need to create a family that prospers beyond one generation.