Strong governance and clearly defined procedures for how you run your business are as important for family-owned organisations as they are for larger or publicly-listed companies.
Robust governance underpins and formalises how good decisions are made, and by who, and becomes a key pillar within the organisation. It helps to manage the relationships between family members, stakeholders and management, as well as maintaining family harmony and business continuity.
But strong governance is only as good as your canvassing and communication capabilities and should be a comprehensive and collaborative process. You need to have a commitment to revise over time so you have documents that evolve as the business also grows, expands or diversifies, and through the key succession milestones of the business.
While good governance is the solution of the family, engaging experienced experts outside the business can add the independence and expertise needed to facilitate and disseminate the best and most sustainable outcome for the organisation.
Our team at Grant Thornton is made up of qualified consultants who understand family dynamics and are accredited as specialist advisers with peak bodies, including Family Business Australia and the Family Firm Institute. We assist family businesses with the facilitation and the development of governance structures: from family charters, councils and forums, to introducing processes and tools to help families achieve better communication, collaboration and decision-making. The development and communication of these can leverage a family’s competitive advantage and provide alignment of family and business values.
We create forums – away from the workplace ideally for minimal distractions – to develop governance procedures and documents with all key members and at all levels, of the family. Our facilitation, experience and independent advice help to form best practice across the full spectrum of governance, with all perspectives and ideas shared to minimise the potential for conflict down the track.
A Family Charter – guidelines by which the family agree to abide
The value of a carefully considered Family Charter developed in consultation and consensus with all family members is immense. The idea of such a document is to develop ‘Family Lore’, spelling out the Family's values and its policies in relation to the business
In most cases, a Family Charter is not ‘cast in stone' as it is not a legally binding document. The intention is to set an agreed, ‘emotionally-binding' framework that will remain with the family in the long-term: one that clarifies the legacy of past generations and the stewardship for future generations.
The Family Charter can include a range of family policies:
- family vision, mission and values
- family code of conduct
- ethical guidelines
- family job specifications and principles of remuneration
- leadership and management structure
- voting and share ownership
- establishment and working of a Family Council
- family assembly and social gatherings
- family education and development
- requirements of family members before joining the family business
- appointment and role of the Chairman & family Directors
- arrangements for potential vendors of shares and exit mechanism
- procedure for amendment of the Family Charter.
Every family business is different, with different structures, values and goals. While this list is a snapshot of what areas which might be covered by a Family Charter, the ultimate design is unique to the family’s intended purpose for the charter. It must be regularly reviewed to ensure it still meets the needs of the family as it grows and changes.
A particular benefit of the family charter process is that it provides the opportunity for a family group to consider and obtain consensus on sensitive matters which have the potential to create disharmony, in a facilitated ‘safe’ environment, and before any of the trigger events have occurred. This approach avoids the necessity of obtaining agreement in a time of family crisis.
Our team is able to guide on best practice, but also facilitate a natural collaborative evolution of a family charter to reflect the individual family business. We strongly believe the experience and work the family does together to create this framework will have as much, if not more, value than the actual paper document produced at the end of the process. When a family reach consensus and develop ‘buy-in,’ this emotionally-binding document becomes very powerful in building a stronger family and family business preserving the family wealth and values for generations to come.
Family businesses can benefit from the development of two pillars of governance: a family pillar and an enterprise pillar. Once established, it becomes easy to create sub-groups that reflect the family business’s values and goals. For instance, a Foundation, or education fund for family members.
Illustrations: concept created by Dennis Jaffe and Jim Grubman
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