How a Family Council Builds a Legacy for Generations

Published by Mark Slater on Mar 04, 2020

 

A Family Council can be as unique as the family themselves.  As successful business families expand, they may choose to form a Family Council to help promote communication within the family by providing a sounding board for family members who can share their personal objectives, concerns and ideas. Some Family Councils are formal organizations with appointed officers and regular meetings.  Others are informal family gatherings coordinated as needed. 

 

The Family Council will consider complex issues that face a family in business and similar to a Board of Directors that oversees the interest of the business, a Family Council concerns itself with overseeing the interests of individual family members.  Additional functions can include supporting the education of the next generation in areas such as family dynamics, ownership, financial stewardship and philanthropy.

 

Take the story of Julie’s Family Business where she, Dave and Alan were reflecting on the benefits of her Family Council along with the questions to be considered when deciding to create a Family Council for other families (click here to read the complete backstory). 

 

Functions and Goals 

 

A Family Council promotes responsible stewardship of family assets. As time passes, this becomes more important as fewer family members may have firsthand experience working in the business.

 

Over time, as the family expands to multiple generations, family members may have less personal contact and a Family Council can help maintain healthy family relationships and can offer leadership for effective decision-making for continuity of family interests. 

All family members are usually eligible to participate and unlike the board members, family council participation is not based on business acumen, education or training. 

 

The Family Council in a family-owned business carries the perspective of the family and individual member’s interests are then aligned with the more broadly-based Family Constitution. 

 

How A Family Council Works

 

Back to our story, where Julie inherited one-third of her father’s shares of the family business.  Although she does not get involved in day-to-day management, she protects the legacy of her grandfather and father through the Family Council. Her grandfather built a heritage business to pass from generation-to-generation. However, her grandfather knew that few families last forever without inter-personal drama and that the disruptive and destructive power of conflict magnifies in family-owned businesses.

 

Before the terminology of Mission Statements, Julie’s grandfather developed a series of hand-written documents that laid out principles and practices. When he retired, his son took over leadership, so those documents were formalized and strengthened with language and structure better suited to the business at that time. Semi-annual Family Meetings, like the one Julie chaired this year, continue as central to the process. The chair rotates every year, so responsibilities vary. Members change as frequently as makes sense based on the size and complexity of the business.

 

Conflict Resolution and Family Councils 

 

As mentioned previously, the structure of family councils is different for each family depending on their industry, resources, size, culture, and interests.  Selecting family members for leadership roles can create inherent tensions so some families use rotation for equality to develop progressive participation. As a best practice, a Family Council should be comprised of members who represent the various stakeholders in the business.  

 

You should never assume family members all share the same dreams for their lives or the firm and disagreements within the family can jeopardize the long-term viability of any business.  As both the family and business grow, the challenges and complexity of the issues the family face can increase. A Family Council can be responsible for creating policies and procedures for workable solutions to these issues as they arise.

 

Since not all members of larger multi-generational family businesses can sit on the Family Council, some also include an annual Family Assembly in conjunction with the Family Council. The Family Assembly allows participation opportunities, communication, education and renewal of family bonds for all family members.

 

Organizing and managing a Family Council presents challenges, but it remains essential to long-term continuity of the extended family. Family cohesion brings trust and tolerance for changing times and the adaptation of formal Family Council structures can help support every member of the family.