Academic journal article Journal of Small Business Management

Strategic and Business Planning Practices of Fast Growth Family Firms [*]

Academic journal article Journal of Small Business Management

Strategic and Business Planning Practices of Fast Growth Family Firms [*]

Article excerpt

Fast-growth family firms were surveyed about their business and strategic planning practices. Of the 65 fast-growth family firms surveyed, the majority prepare written formal plans. The business plans are in sufficient detail to enable the business to tie planning to actual performance and to adjust management compensation accordingly. The majority of the firms regularly share information with employees regarding comparisons between actual company performance results and goals or planned performance. Further, the majority of the firms describe their business strategy as a high quality producer strategy rather than as a low-cost or time-based strategy. Further, when bringing new products to market, these fast-growth family firms adopt a first mover or early follower strategy. Implications of these findings for growth-oriented family firms are presented.

Business and strategic planning is critical for family firm success (Brown 1995; Knight 1993; Jones 1982; Ward 1988), for growth (Astrachan and Kolenko 1994; Poza 1989; Ward 1987, 1997), and for performance (Aram and Cowen 1990; Arthur Andersen/MassMutual 1997; Schwenk and Shrader 1993). However, research on the business and strategic planning practices of family firms is sparse (Rue and Ibrahim 1995, 1996; Wortman 1994), and research focusing on growth-oriented family firms is almost non-existent (Sharma, Chrisman, and Chua 1997; Upton and Heck 1997).

Planned growth is particularly important to family firm survival (Ward 1987). Poza (1989) notes that family firms must consider growth strategies to avoid the decline and loss of the family business, to promote continuity and family unity, and to save jobs and create wealth. However, family firms face many obstacles to growth (Alcorn 1982; Peiser and Wooten 1983; Upton and Petty 2000), including a reluctance to plan for it (Plostner 1994; Ward 1997). This study presents the business and strategic planning practices of fast-growth family firms. We examine the role of the board of directors in the development, implementation, and communication of the plan. Finally, we suggest leading planning practices which may be valuable to family firms as they face growth issues.

Planning and Strategy in Family and Fast-Growth Firms

As many authors have noted, there is no consensus definition of a family business (Wortman 1994; Upton and Heck 1997). Several authors have called for definitions that use multiple conditions to identify family businesses (Handler 1994; Litz 1995). Among the definitions for family business that involve multiple conditions, many use requirements such as family ownership and control, family influence on decision-making, and intent to transfer the firm to the next generation (Sharma, Chrisman, and Chua 1997). These are the conditions we have used to identify family businesses in this study. Consistent with prior entrepreneurship research, in this study we define fast-growth firms as those that are willing to take risks, to be innovative, and to initiate aggressive competitive actions. These orientations and actions support the high-growth firms' efforts to identify attractive product market opportunities while pursuing superior financial performance (Ireland and Hitt 1997; Zahra and Covin 1995).

Family firms are urged to perform business, strategic, and succession planning for their survival (Ward 1988). However, most of the research on family business planning focuses on succession planning rather than on business or strategic planning (Handler 1994; Upton and Heck 1997). Available research suggests that while family firms should perform strategic and business planning, most do not (Brown 1995; Rue and Ibrahim 1996; Silverzweig and D'Agostino 1995; Ward 1987). Greenwald and Associates (1993), in a national survey of 614 family businesses, found that 58 percent of those businesses had no written business plan. In a 1997 survey of 3,033 family businesses, Arthur Andersen/MassMutal discovered that 69 percent had no written strategic plan. …

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