Goals of Family Governance
You understand the needs and wants of the family, and the next step is setting up the right governance structures. Family governance is one of the most critical factors needed for any successful family enterprise to achieve a successful continuity plan. The first point I want to make about Family Governance is, watch your narrative.
Are you telling your family we should have a family governance structure because it’s what you’re hearing, and that the “buzz” is that all good family enterprise families have it in place? Are your advisors pushing you forward to have a family constitution and you are leaving it to them to create this document?
Are you putting energy into something you think is complex, and is approached with frustration?
Family governance is not overly complicated once you understand the purpose and intent. It is not something to be created without the input and clarity of the family members themselves. And it is not something to be approached with a “we should have it”, because we read about it somewhere.
Let’s start with “what governance is?” In a nutshell, governance is a system to help you make better decisions. As a family you already make decisions together. To document your family governance is to bring awareness to how you already make decisions. Then expand by asking “What’s been working for us and what hasn’t, and what changes do we want to see in how we make decisions better together?”
The first step is to come together and have intentional conversations on exactly this topic. Take the stigma away that governance is a very structured, bureaucratic, costly endeavour. Focus more on saying “Let’s document what works for us as a family in making decisions together.” You may want to use how you went about organizing your parents 25th anniversary or Grandpa’s 80th birthday. What about the last holiday you took together, how did that come about? When you break down what you’ve already done, the base of your family governance is likely already all there.
The top goal of having family governance is to have a shared vision and set of values you all agree are the core of your family. In communicating and documenting together on this topic, you will come to discover the glue that keeps your family together. For some families just speaking about it is enough. For others, they create a family motto or mission statement that becomes the family’s guiding star; to query are they meeting all that is in this statement when coming together to make a family decision. If your family is ready to adopt more structure in your governance, you may begin with family meetings, set up committees to discuss and recommend decisions, form a family council to co-ordinate voting and execution, and create a formal Family Constitution. There is no one set of rules that you must focus on what is best for your family, so each family can customize the definition of the right governance for them.
You may want to begin with creating a vision statement on what family governance means to you: a written document, a set of policies, a one line statement, an understood agreement, and then set out on a process to achieve what works for you as a family. Some families can embark on this journey alone, others have a family champion who steers them forward and others reach out to a skilled advisor who guilds them down this process.
If you are at the stage where you are asking “Do we already have Family Governance Structures in place?” you may want to consider the following:
- What does wealth mean
- Family vision
- Family values
- Family meetings
- Family council
- Family assembly
- Family office
- Independent board of directors
- Philanthropic board/intent.
To be set with Family Governance, you may have one or all of the above. Do what is right for your family, and set your goals appropriately. The goal of Family Governance is not focused on financial wealth. The goal is family harmony, unity, and keeping the family engaged. The focus is on family relationships and learning and developing together. It’s about empowering the next generation and giving voice to all family members. It’s important to take the perspective of planning with the family rather than for the family.
“Families better the odds of successful continuity through regular structured dialogue – one conversation at a time.” Do you have Family Governance in Place?
If you are looking for further readings on governance check these out:
- When having too many experts on the board backfires, Tilcsik & Almandoz, HBR
- How to be a good board chair, Shekshnia, HBR
- Range: Why Generalists Triumph in a Specialized World, Epstein, 2019
- David & Sharon Johnston Centre for Corporate Governance Innovation
Decision Tree Question: Do You Have Family Governance in Place?