As your business grows and family members mature, family dynamics and the decision-making process become much more complicated. When the enterprise prepares to move beyond the founder phase into succeeding generations it is important to consider not only business governance, but how the family will be governed in relation to the business. Effective family governance can serve as a framework to provide clarity on roles and relationships and reduce conflict among family members.

Here are three takeaways to get you thinking about your family governance from the Family Business 360 podcast episode “Ownership, Business and Family Continuity: How Family Governance Builds a Stronger Business and Personal Relationships,”  featuring Don Bielen and Paris Powell of Perkins & Co. You can listen to the complete episode online.

Family strategy is more than just wills, trusts, and buy/sell agreements

These items are important and families should consult with their professional advisors to make sure they have these contingency tools in place, but an effective family strategy takes a higher level approach. Family governance acts as a blueprint to manage the complexities of a growing family business. It can help manage communication, roles and responsibilities, and provide a tool where family members can come together to work toward a common vision of the family and business.

It’s also important to understand that just as estate documents should be reviewed on a regular basis to ensure they are up to date, governance structures can evolve over time to adapt to the changing needs of the family.

Understand how each member of the family fits into the overall system

Roles in the family business are much more nuanced than just determining if someone is part of the business or not. It’s helpful to look at the family business as a system where each member occupies a place depending on a combination of three key attributes; do they have an ownership stake in the business, are they members of the family, and are they involved in the operation of the business? Knowing where each family member fits can clarify roles and expectations, leading to better communication and less conflict. The commonly used “Three Circle Model” below gives a visual illustration of this concept.

Three circle model
Above: The three circle model, first developed by Harvard Business School faculty Renato Tagiuri and John Davis in 1982.

Family meetings are important

Structured family meetings are one of the most practical activities a family business can undertake to start building the foundations of family governance. Family meetings can provide a venue for family members to identify common vision and goals, and provide younger family members an introduction to the values and history of the business. They can also help families identify competing interests and potential areas of conflict between members and help reduce or prevent serious conflict from occurring.

Listen to the complete episode on the Family Business 360 podcast for more insights on family governance.

Visit our website for a listing of upcoming Family Business 360 breakfast events.

Thank you to Don Bielen and Paris Powell of Perkins & Co. for appearing on the podcast.

References

Bivalent Attributes of the Family Firm (1996), Renato Tagiuri and John Davis, Family Business Review, Vol IX, No.2, pp. 199-208

Perpetuating the Family Business: 50 Lessons Learned From Long Lasting, Successful Families in Business (2004), John Ward, Palgrave Macmillan

 

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