Effective Governance Systems

Published: Feb 22, 2022

Effective governance systems form the very root of our ethical behavior as human beings and are what primarily distinguish us from all other living things.  The 10 Commandments are one of the first articulated governance systems laid out for mankind to follow as a collective group, to work together effectively for the benefit of everyone. Without such governance system, there would be chaos.

Similarly, governance systems are needed in all 3 circles of the 3-Circle model applicable for a successful family enterprise continuity plan, governing the Family, the Business and the Ownership. The most important goals of governance include:

  • Cohesion – to work together for the welfare of the group.
  • Learning and development – to help each other learn and improve.
  • Skills development – to hone the expertise that depends on experience and mentorship.
  • Repair and strengthen relationships – to enable human relational healing.
  • Plan with the family for the family – to enable the family to work as a united team.
  • Give voice to all members – so everyone feels they are contributing in some fashion and have a sense of belonging.
  • Differentiate 3 circles – to recognize that different governance techniques are uniquely needed in each circle.
  • Build potential for NextGen owners – to groom and entice the next generation to receive the baton and run with it as the speed needed to win the family enterprise marathon.

There are several proven governance systems, which can be considered, including:

  • Family Circle – Family Constitution (with clear vision, mission, and value statements), Family Meetings, Family Council, Family Office, Family Foundation
  • Business Circle – Strategic Business Plan, Independent Board of Directors, Board Meetings, Formal Job Descriptions, Performance Appraisals
  • Ownership Circle – Shareholders Agreement, Shareholder Assembly, Owner’s Council, Shareholder Meetings

Good governance provides for all parties the clear definition of the goals and expectations, and acts like a road map to provide the checks and balances as to where you are at present against where you need to be.  It requires regular periodic assessment and evaluation to ensure the right resources are in place, making the right decisions.

Good governance is intended to lead to the most timely and effective decisions, but they are not always easy ones.  You may have read that the Weston family, an incredible example of a successful multi-generation family enterprise, decided to divest their ownership in the famous Selfridges department store chain in the UK. It was a very prestigious asset for their family, without doubt, located in one of the most desirable locations in London.  This decision must not have been easy at all, and is a strong example of the role of good governance in dynamic decision-making. In discussing the sale, Allanah Weston graciously commented: “I am proud to pass the baton to the new owners who are family businesses that take a long term view. I know they will fully embrace that vision and continue to empower our incredible team to take the Group from strength to strength”.  Essentially, Ms. Weston made the brave admission that someone else may be better suited to taking the enterprise to the next stage in its continuity lifecycle.

Effective continuity planning is not easy at all.  Like Bob Dylan sings…”it’s a hard, it’s a hard”.  But investing the time and effort to install good governance will significantly enhance the likely outcome of success, and must form the center of any long-term family enterprise continuity plan. 

Congratulations! Continue as a Family Enterprise

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