Family council a challenging and strong leg of the business

Educate. Communicate. Develop family policy with respect to the business.

Educate. Communicate. Develop family policy with respect to the business.

Those are the primary aims of the family council, the third leg in governing a family business, following assemblage of an owner’s council and then a board of directors.

Composed of adult members of the family, the family council may be the most challenging component – governance of the family itself.

The purpose of the family council is to create a formal setting where family members can learn about what is going on in the business and develop relationships among themselves. As part of its mission to educate, communicate and develop family policy, the council must establish a family constitution.

A family constitution is the family’s policies and guiding vision and values that regulate members’ relationship with the business. This written document can be short or long, detailed or simple, but every family in business benefits from this kind of statement.

Other areas that family councils take on include boundaries, roles, relationships, use of family wealth, communication problems and family member conflicts.

The family council typically meets annually, lasts one to two days and includes all adult family members, including in-laws.

Families need to decide at what age children should attend these meetings. Most families start bringing the younger generation into meetings at around age 16.

For the younger children, families should consider organizing group activities where the children can begin to learn about the business and develop relationships with their siblings and cousins.

Family council activities include learning about the business through presentations by family and nonfamily managers, discussing (not deciding) the direction of the company, being educated about what the company does, or about important skills such as reading financial statements.

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