A Family Business Council Helps Drive the Family Business
It’s not too uncommon these days to find that a family owned business has a board of directors. But a newly emerging trend is to also create a family business council (FBC). Just how do they work and what are the supposed benefits to be derived from having one?
Unlike a board of directors, the purpose of a family business council is to provide a forum within which issues internal to the family – but nevertheless critical to the successful functioning of a family business – can be aired and resolved in an open manner. For instance, when the decision is made to bring a family member into the family business, the traditional relationships can change. The fact is that the relatives will now have to deal with the family relationship on a highly visible, continuing business basis. Sometimes the family and business roles become confused and blurred, which gives rise to misunderstandings and stress.
In fact there is a whole raft of issues that can give rise to dissension and it should be one of the first jobs of the family business council to adopt a set of rules that clarifies the main areas of potential dispute.
- Clearly defining the authority and responsibility of each family member. Set out, in the simplest of terms, what is expected from each individual and what authority and responsibility each will have in the business. Get this down in writing and, where appropriate, communicate the responsibilities and authorities to the employees. Determine who reports to whom and what this really means.
- Clearly determine the hours of work and vacation time rights of family working in the business.
- Deal with office or workspace issues, parking, furniture and other resources that will be made available. Often these small things are taken for granted, but they can really niggle those who feel they haven’t been treated fairly or with due respect and eventually erupt in a confrontation between family members.
- Clarify compensation and benefits issues and put them in writing. It's not an issue of trust; it's an issue of good business.
Unless there is a forum for discussing these issues openly so that some sort of consensus can be reached among the people affected they can generate tensions highly damaging to a family business.
On a continuing basis the FBC’s meetings will provide updates on the performance and status of the business and allow broader 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 that of the family and it can provide feedback to the board on how the board's decisions affect the family.
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 that person’s next of kin would be the best replacement in the 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.
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 with relevant experience from outside the family. This person needs to be a good organizer with knowledge of meeting procedures and an understanding of family dynamics. A business advisor or consultant would be useful in this role. This first meeting can be used to explain just what it is hoped the council will achieve for the business. Typically this would include:
- Provide an environment that fosters mutual trust and respect among family members
- Provide the opportunity for the attendees to learn to communicate with each other about sensitive family and business issues
- Provide an opportunity for key family stakeholders to define and share their goals for the company and themselves, and to reconcile differences. The family can then develop a vision of where it wants to be in the future.
- Assist family members in learning about the roles, responsibilities and relationships of the various stakeholders and groups (management team, board of directors and family council)
- Facilitate an appreciation of differences of viewpoint among family members
This is a forum where there should be no fear about questioning or disagreeing. If you are not able to disagree, with some objectivity, over business issues, you'll invariably find that the family relationship will be dragged into the disagreement.
A 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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