Where Does a Family Council Fit into a Family Business?

Where Does a Family Council Fit into a Family Business?

The term “Family Council” isn’t one you hear every day in business circles. If, however, you are a family- owned  business, especially if the organization is multi-generational, chances are an adviser, other family group or even others in your family may have raised this concept with you.

Often we see that a family business can be at the very centre of a family’s existence. The family business provides employment, their source of income and therefore lifestyle, gives them a place to work together where family values are often integrated with the activities of the organization. The family business can be a complex, multi-layered management organization sometimes with offices spread nationally and even globally. Some family members may choose to work in the business, some choose not to and some may never be given a choice.

One of the biggest challenges for a growing family business is finding a way to balance the need for healthy family relationships with the responsibilities of running a business, especially when long-term business strategies can be the cause of a disagreement. Often disharmony will arise in a family-owned firm and this can have a negative impact on the success of the business. Or alternatively disagreements on the structure or direction of the business can impact otherwise happy family gatherings. A family council can provide a perfect opportunity to allocate specific roles and responsibilities to individual family members, which can help to re-define adult positions and relationships in the family.

The best way to get the ball rolling on setting up a family council is to get a good facilitator in, someone from outside the family group and someone with plenty of experience in the family business sector. Some family groups use the setting up of the family council as an opportunity to arrange a weekend retreat
The first item on the agenda for setting up the family council 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? These simple questions will provide a clear framework for the family council’s operation.

Then moving forward, the family council can meet on as often as monthly but usually every 2-3 mths. Their charter will be to act as the primary link between the family, the board, and senior management. Some of the issues they may manage include:

  • Family members roles in the business and the development opportunities for the next generation
  • The appointment of non-family managers to positions such as CEO
  • Establishing family policies such as family employment, compensation, and family shareholding policies.
  • Drafting, revising and recording the family position on its history, vision, mission, and values
  • Suggesting and discussing names of candidates for board membership.
  • Handling family investments including diversification and charities

The items discussed can be surprisingly wide-ranging but if a Family Council operates with a clear set of rules it will build consensus and create compromises within the family that balance the needs of the individual, the family and the owner in the best interests of the business – which, after all, amounts to serving their own best interest as well

David Harland is the Managing Director of FINH

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