Benefits of Establishing a Family Council

When a family business expands from one generation to the next, it becomes more complex as you have more people with a stake in the business. It’s important to have a strong family governance council in place to clarify everyone’s roles. With one, you have a better chance of avoiding conflict within both the family and the business. There’s also some evidence that a council improves the growth of a business and sustainability of family assets.

When you institutionalize practices, polices and processes within this council, you create more structure and predictability. That gives you a better framework for the business to grow and move into the future. It also creates more accountability and transparency, which leads to greater trust for both family members and employees.

It’s important that the council clarifies roles and reporting lines; distinguishes between ownership and management functions; and establishes things such as vacation and promotion policies.

The council should be made up of representatives from each stakeholder group, including current owners, the next generation and, possibly, spouses. I also recommend term limits be established for council members.

Set up up the framework for the council at a family meeting. Once that is done, draft a document detailing that structure, and business and family values. Share that draft with all family members. Progressive companies will also send that draft to non-family company managers.

Establish a council code of conduct and participation rules, and decide how often the group should meet.

If the family has also decided to establish a foundation, the council can set up processes for how the foundation works. A family foundation board can be a good way to get younger people involved in formal family matters.