Regular meetings within a family business provide structure and purpose. This serves the family well, and builds cohesiveness between business operations and family relationships.
Family meetings regarding oversight of the business:
The Business Dictionary defines governance as, “the establishment of policies, and continuous monitoring of their proper implementation, by the members of the governing body of an organization. It includes the mechanisms required to balance the powers of the members (with the associated accountability), and their primary duty of enhancing the prosperity and viability of the organization. ”
At Quad Group, we are fortunate to have worked with a variety of governance models, both within our own family businesses, as well as those of our clients. Family ownership groups, formal or informal, strive to bring some structure to family discussions. The type of governance, and the scope of control, is largely determined by the goals of the family ownership group.
The Family Assembly groups that we have worked with, some of which were in the initial stage of formation, helped families understand roles and responsibilities. Multi-generational groups came together with a common purpose: to strengthen the family. Family assembly meetings can take place in a couple of hours, over the course of a daylong retreat, or over a weekend.
We have facilitated educational workshops to help family members learn more about the family history in order to build greater connection to the family business legacy. Other meetings have included business education specific to the business, or broader skill-training such as reading financial reports or competitor information. We recommend families include activities that are fun and interactive to build relationships. Recreational activities can range from time on a hiking trail, games on the beach, or a family golf tournament.
Some families that we’ve worked with have made a commitment to giving back. Finding a cause that is meaningful to your family, and dedicating time to work together as a family is a valuable experience. It might be providing gardening or painting, taking trips to the dump, or stuffing backpacks for the local schools.
Ultimately, the goal is to create opportunities within the Family Assembly to work together in activities that are not necessarily direct business responsibilities. When family members interact in these non-business activities they let their guards down, better understand each other’s strengths, weaknesses, and interests. Overall, individuals come to get to know one another better.
Typically, Family Councils are a subset of a Family Assembly group. They are charged with representing the family in the matters pertaining to more detailed governance. Developing policies, creating effective communication for all family members (especially critical when more than one family branch exists), and ensuring that all family desires are represented and addressed is important to the success of the family. Family Councils also represent the family with the company leadership and/or board.
In our work with families and family businesses, we have witnessed some best practices, these include:
Usually the first step in family business discussions, the family board often sits at the kitchen table. These “meetings” tend to be mostly informal and not regularly scheduled. They may be held in response to a specific business event or need. Typically families with this informal governance have fewer family members and embrace a simple decision-making model. We find them to be first- or second-generation businesses for whom a simple family governance model works. This “board” consists only of family members.
An Advisory Council is the next step of business governance and starts to bring in independent members (“outsiders”). The mix of family and independent members can be weighted first with more family and, over time, increase to have more independent members.
One of the advantages of working with an Advisory Council for family businesses is that it engages outside perspectives. We have partnered with family leaders to bring in advisors with different experiences and areas of expertise to help fill gaps with the leadership or management. Outside advisors introduce objectivity and accountability to the advisory board, and have the expectation that their advice will be respected.
The evolution of a Board of Directors (BOD) takes many shapes, but the end of the evolutionary process is typically a fiduciary board with a majority of independent directors. A BOD has a legal obligation to care for the business and the management. A CEO and management team is often focused on the day-to-day business, while a Board can provide valuable review on long-term strategies, transition or exit planning, and risk management.
In our conversations with family businesses, a common concern is loss of control of the business. We work with families on governance models to help them understand the relationships between the family and the Board and the Board and management. When designed well, and implemented thoughtfully, a family business can thrive under a Board of Directors.
While a Board of Directors may not be what your company needs at this point in time, we partner closely with each ownership group to help identify the right governance model for each business.