The Case for Family Councils
In truth a family is what you make it. It is made strong, not by number of heads counted at the dinner table, but by the rituals you help family members create, by the memories you share, by the commitment of time, caring and love you show to one another, and by the hopes for the future you have as individuals and as a unit.
– Marge Kennedy
August is the perfect time of year to think about family. In many parts of the world, it’s the most popular month for taking time off from work and going on family vacations or visiting family before the hustle and bustle of a new school year and the important fourth quarter begins. For those involved in family enterprises, for whom family IS business, the relatively slow month of August represents an opportune time to reflect on the year, assess the prevailing family dynamics and evaluate the family’s governance, or lack thereof.
There’s that word again – governance. If you are a regular reader of Wingspan Insights, you might wonder why we bring it up so often. The fact is, governance, which is just a fancy name for a system of management, is useful in all undertakings because it provides a framework and clarity for everyone involved. Imagine a sixth-grade class if the teacher didn’t have classroom guidelines and a lesson plan, or a battlefield in WWII if there had been no training, personnel rankings, or battle plan. Action without governance can lead to chaos and chaos almost always leads to confusion and unintended consequences. That is why Wingspan always emphasizes governance as the primary building block of successful family enterprises.
Governance isn’t only needed in the operating businesses in these instances. Research suggests that enterprising families greatly benefit from governance at the family level, as well. Yet, according to a recent study, only 35% of enterprising families surveyed reported having a family council, “the basic unit of family governance” for a family in business. While some may argue that a formal family council is too bureaucratic and not necessary for all enterprising families, the fact remains that the simple exercise of establishing a family council serves to bring the family together, create avenues for communication, and establish a framework that should help to reduce, and maybe even eliminate, conflict and chaos.
For those not familiar with the concept of a family council and its purpose, they generally exist as vehicles for enterprising families to foster family connections and set guidelines. As family businesses begin to span generations, it is very common that not all family members will work in the business. Council meetings, therefore, are appropriate venues for providing important information relevant to family shareholders and future shareholders and for making decisions about the future of the family and the business.
Specific ways family councils help families:
- Keeping family members connected and interacting as the family grows
- Determining a family’s shared values
- Codifying the family’s mission, vision, values, and decision-making processes in a family constitution
- Developing important family practices, such as employment policies, terms of prenuptial agreements and distribution policies
- Planning and managing education and development of the next generation
- Preparing for succession
- Managing other shared assets
- Planning future family events
Creating a family council doesn’t have to be daunting, either. Meetings can be held as frequently or infrequently as feasible. Wingspan recommends a minimum of two meetings per year – with quarterly meetings optimal – utilizing a simple agenda that can be established and reused. (Councils might also have subcommittees to focus on specific topics and those committees can meet more often than the larger group.) When working to implement governance with families, we recommend convenience, encouraging them to think about occasions where they are already planning to be together (like holidays or birthdays) and to plan their family council schedule accordingly. We also recommend the participants take turns being responsible for planning and preparation, giving everyone an equal opportunity to assume a leadership position within the family. Not only does this promote buy-in of the process, but also gives all members leadership training, which is particularly important for rising generations. Ultimately, it is our experience that families that implement a family council structure attest to improvements in communication, increased trust, more proactive planning, and a greater sense of overall family purpose.
So, if you are part of an enterprising family and already have a family council in place, congratulations. Your chances of future success and harmony are greatly improved. And if your family has not yet taken the step to implement family governance and we have piqued your interest, let Wingspan help you to put a plan in place.
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