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A Family Business Council Helps Drive the Family
Business
A family business can be at the very core of a family’s existence. The
business employs them, feeds and clothes them, and gives them a place to
work together where family values are often integrated with the
activities of the enterprise.
Not all family businesses are ‘small’ businesses. Some family businesses
are in fact large corporations. These can have sizeable boards of
directors, multi-tiered management structures, and offices around the
world.
Other family businesses are of the ‘Mom and Pop’ corner store variety
with just one location and two directors. It’s not their size or scope
that brings them all together, but the fact that they’re owned by
members of a single family.
Expertise on the Board
Family firms can include people
from outside the family in their boards of directors. It is not uncommon
for the company’s accountant or attorney to have a seat on the board of
a family business; marketing specialists and those with financial
expertise are often invited to join the boards of family-owned concerns
where they can help guide the direction of the business.
A key challenge faced by most family firms is finding a way to balance
the need for family accord with the responsibilities of running a
business, especially when long-term strategies are the cause of a
disagreement. Sometimes disharmony or conflict will arise in a
family-owned firm and this can have a negative impact on the success of
the business.
In times of crisis decisions are often difficult to make when ‘all votes
are equal’ or the head of the family wants to take the business where
younger members don’t want it to go. One way to help remove the
opportunity for such situations to develop is to set up a family
business council (FBC) that can determine the family’s policies in
regard to the business and gain agreement on the family’s relationship
to the enterprise.
A New Source of Guidance
Unlike the board of directors, the purpose of a family business council
is to include all family members, including those not directly involved
in the business, in the ranks of advisors to the family enterprise. The
FBC’s meetings provide updates on the performance and status of the
business and allow broad issues, such as who should be the next head of
the enterprise or whether the business should be sold, to be debated.
The FBC will share many of the concerns of the company’s board of
directors, but its perspective is strictly the family’s and it can
provide feedback to the board on how the board's decisions affect the
family.
Just like the board of directors of the business, the FBC meets
regularly – perhaps four times a year, and keeps minutes of every
meeting. But the family council is a democracy in which the majority
vote prevails. Its function is advisory only, and although it makes
recommendations to the family businesses’ board of directors, it is not
there to guide or drive the business itself.
It is a forum where the family
can establish or clarify its values and policies and determine how
extensively these need to be applied to the business. For example, if a
senior family member is planning to retire from the organization it
could be that someone other than the person’s next of kin would be the
best replacement in that position. The council can make that
recommendation to the board of directors as an expression of the
priority the family gives to having a successful business.
The Council Transcends Generations
The members of the family business council would be all the members of a
family that have reached a certain age – 18 or 21 years can be used as a
guideline. The extended family that makes up the FBC will also include
the spouses of family members. (How extensively this is carried is up to
the family to decide, but it can also include partners if marriage isn’t
an issue.)
One of the key functions of the family business council is to ensure
that younger generations have input into the direction of the business
at a point in time before they take over control of the organization.
This will help the members of the older generation as they work to
prepare the firm for succession, and give the younger members of the
family a greater feeling of ‘ownership’ throughout the succession
process.
To get a family business council formed and hold its initial meetings it
would probably be best to engage a facilitator from outside the family
with relevant experience. This person needs to be a good organizer with
a knowledge of meeting procedures and an understanding of the dynamics
of a family. A business advisor or consultant would be useful in this
role.
Decisions Need to be Made
The first responsibility of the
new FBC will be to agree on its structure, its responsibilities and how
it should be governed. Why is it being formed? Who is eligible for
membership? Who will be the chairperson? How often will it meet? Until
these kinds of details are worked through the family business council
will not have a framework for its operation.
Once these basics have been taken care of the family business council
can hold its first full meeting to progress to the next level – this can
include deciding on a vision for the FBC and writing a constitution or
set of guidelines for the council.
The challenges facing any business are wide-ranging and often have the
potential to destroy the organization. Pressures within a family can
exacerbate the effects of these challenges, especially as the business
grows and reaches points of generational transition.
The family business council will help preserve the integrity of the
organization so that all generations – present and future, can enjoy the
rewards of the hard work and dedication that grew the enterprise to its
current state.
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