Create the right mission statement to keep your family business on course.

The founder of a family business has placed his two grown children in high-level positions in the firm, but only one of them has the skills and commitment to lead the company to success. The other often takes time off to pursue personal interests, causing so much resentment that the more capable and hard-working sibling eventually quits. When the founder dies and the remaining sibling takes over as CEO, it quickly becomes clear that he is not capable of running the company on his own. By the time he admits this and allows a qualified manager to take over, it is too late to turn the business around.

The company's failure might have been prevented if this family had been able to communicate more effectively. If the father had understood how his children truly felt about their involvement in the firm, he might have been able to find appropriate and satisfying roles for both of them--and to make sure that the sibling who was best qualified to ensure the long-term success of the business would be next in line for position of CEO.

This family was missing two valuable tools for keeping emotional dynamics from interfering with good business decisions--a Family Mission Statement that sets down the family's vision and core values, and a set of guidelines that define how family members will participate in the company. The failure to develop these tools is one reason only 30 percent of family businesses make a successful transition to the second generation.

The Family Mission Statement clearly defines the principles a family lives by, the impact they want to make on the world around them and how they want to go about developing a legacy that reflects their core values. This statement--part of an overall planning process that should also include succession and estate planning as well as strategic planning and leadership development--can serve as a guide in business decisions as basic as what types of products a company will manufacture or distribute. It ensures that the business will maintain certain standards that will make it a source of pride for the entire family.

Families that don't pull together and find common ground in determining what's best for the business as well as the family are more vulnerable to problems that can weaken the company. For example, family members who own stock but aren't involved in day-to-day operations may push for higher dividends to benefit themselves in the short-term, even though this would hinder the company's ability to reinvest capital in order to remain competitive in the long term.

Family members will focus more on the big picture if they have participated in the dialogue and give and take that is involved in developing a Family Mission Statement. Some family business experts believe that the open communication that takes place as this statement is created is even more important than what the document ultimately says.

A Family Mission Statement can help a business stay on course so that it can provide financial benefits and career opportunities for family members over many generations. But the statement has value only if it reflects input from everyone who has a stake in the company's success. If the founder simply dictates what the statement will say, the opportunity to engage the entire family in an effort to work toward common goals will be lost.

An important part of this process is a discussion of the roles various family members will have in the business. This is the time to clarify each person's role and to make sure it is a good fit. Encourage everyone to be honest about their dreams and goals. Some may prefer to pursue a different career path outside the family firm, and it doesn't help the business if family members are involved only because they feel obligated to meet their parents' expectations.

Family members who are dedicated to the business should participate in a highly professional employment process that involves training, goal setting and performance reviews. They should also understand what is expected of them before they become involved in the company. For example, one requirement might be getting outside experience at another business before joining the family firm, and you may want those in the younger generation to receive some mentoring and to become thoroughly familiar with the business by serving in various roles before assuming a key leadership position.

The family also needs to offer some ways for those who do not want to be directly involved in the business to pursue their own passions while supporting the values in the Family Mission Statement. For example, a foundation could be established se that family members can engage in philanthropic work that would help others and also enhance the image of the family business in the community. Another possibility is to set up a "family bank" that offers loans to family members who want to pursue other entrepreneurial ventures. A professional process should be set up for evaluating and monitoring these ventures to make sure that they are consistent with the core values outlined in the Family Mission Statement.

Once you have developed a Family Mission Statement, it is important to reevaluate it periodically as various changes impact the business and the family. Holding annual family meetings is one effective way to accomplish this while encouraging family members to openly discuss issues and concerns that affect the business. Some families even hold such meetings monthly to encourage open communication on an ongoing basis. This gives the founder and other company leaders a chance to keep the entire family informed on how the business is doing so they can contribute ideas to help solve problems as well as celebrate accomplishments.

Although the founder's dream for the family business may not be shared by everyone, it is possible--with good planning and communication--to unite the family in an effort to build a business that will not only be rewarding in the short term, but also will become a valuable legacy for generations to come.

Bita Ardalan is the Market President at Union Bank of California for the Greater Los Angeles Commercial Banking Group. She can be reached at [phone] and at [e-mail].