Important things to know when organising the Family Business

by | Jul 28, 2014

Organising the Family Business

Family reunions and family council

Transparency fosters trust. As former US Supreme Court Justice Louis D. Brandeis once noted, “Publicity is justly commended as a remedy for social and industrial diseases. Sunlight is said to be the best of disinfectants ….”

This holds true for families as it is applicable to the sound management of large commercial companies. The place where this transparency can be achieved in families is the family reunion, a gathering of family members at regular intervals during which information is provided to the family members on the ongoing business, important events and future developments.

In particular if families are large and where the family decides to include spouses and children (of a certain age) to be admitted to the family reunion it makes sense to create from the family body a committee charged with the organization and running of the family reunions. The formation of such a committee – or family council – should be based on the family charter which should define its duties, exact composition and its decision-making powers and the requisite procedure.

In its function as the link between the business and the family, the family council has the duty to disseminate information about the business to the family members at the family reunions. The family council should draft an information policy regarding the development of the business. Holding family reunions and involving younger generations from a suitable age goes towards establishing a healthy understanding and identification of these persons with family business.

The family council is best made up of family members with a direct stake in the business or who are actively involved in the management of the business. Choosing a chairperson for the family council can be a challenging task.

The person should be someone that enjoys wide trust within the family and who has a large measure of experience in the family business and who can also communicate well with the various groups making up the family reunion. Since it is also the chairperson’s calling to promote compromise and facility consensus among the family members it is advisable not to appoint the CEO of the family business to this position. In many instances the CEO might lack the objective distance to the business necessary to achieve a healthy compromise.

Information and communication

In order to ensure positive relations within the family and the environment in which the family business operates (inner realm being the family and the outer realm being society at large), a sound and honest information policy should be devised and adhered to. Depending on the size of the family involved such communication may take the form of regular dinner table discussions or the distribution of updates in the form of family newsletters.

Both formal and informal communication should find their place. Discussing family relevant business issues at an early stage and with the necessary frankness are an important part of avoiding or diffusing differences of opinions and conflicts becoming insurmountable.

Taking into account that the perception of a family business by outsiders and the public at large has significant influence both on the reputation of the business but also on the loyalty of the family members to the business it is important to also develop a coherent and positive communication policy to the public. By communicating major decisions to the public, the family can increase its credibility and gain the trust of the general public and its customers.

At the same time the advantages of a positive communication policy need to be balanced against the need to keep confidential certain valid business interests, trade secrets and the will to safeguard the family’s privacy interests. Where no clear and well supported communication policy can be achieved internally, it is advisable to include an external chairperson or mediator in the process.

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