Key investment decisions mix ideas, beliefs, emotions and facts. Competing ideas, different appetite for risk/change and limited resources all contribute to complexity. Examples include changing enterprise mix, developing farm infrastructure, investing in new technology/machinery or expanding the farm.
In family business, good decisions happen when all ideas are heard and a clear process guides action. Poor decisions can lead to conflict, frustration and overlooked details.
A good start is aiming for a good, rather than right decision, which can only be made in hindsight. This recognizes the level of variables whilst retaining responsibility as a manager.
Preparing a business case to assess potential benefits and costs is a useful tool. This may include a partial, development and/or cashflow budget to show the financial result. This makes discussion more productive as it shifts to the assumptions rather than the overall idea. Sometimes two people might disagree on the efficiency gain of a new technology, however, it might still be profitable even at the lower level assumption.
Communication is crucial throughout and includes providing everyone with the information prior to deciding and allowing them to share their view.
Ultimately, each decision needs to assist the family and business in achieving their strategy, which needs to be defined if it is unknown. Family meetings or an advisory board help keep decisions structured and inclusive.
If you’re looking to learn how to develop a business case, then our Next Gen Breakthrough program may be of interest.