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Build Unity With a Family Council

Achieving multi-generational success as a family owned and managed business is a fairly simple matter.

All the family has to do is: eliminate potential sources of animosities and dissension; ensure that all family stakeholders – those who are passive shareholders as well as those actively involved in management – have a clear understanding and appreciation of individual goals, values and expectations; have clearly stated ground rules that outline the relationship between family members and the business; and have clearly defined their goals and expectations for the business and as a family in business together.

That's it! Just the simple, relatively straightforward application of common sense and any family business can span the generations like the Bombardier's, Irving's, Sobey's, Weston's, Shaw's, Bronfman's or Reitman's or any of the family owned/controlled businesses that comprise 30 per cent of the Financial Post 500.

The difficulty, as Will Rogers observed, is that "common sense ain't necessarily common practice". And for most family businesses this means that turning common sense into common practice is an insurmountable challenge.

Yet some business families have obviously been successful in avoiding the animosities and dissension that can complicate a family business in ways that can make Dallas seem boring and certainly bear no resemblance to the average MBA textbook. But whether they're the Bronfmans or Joneses, families that are successful in business together have a lot in common when it comes to handling family relationships, governing their decision making and running their businesses.

Through instinct or conscious planning, successful business families have – under one name or another – a family council and a set of family rules and policies to ensure regular communications, common goals, shared values and a clear understanding of what membership in the family means in terms of the relationship between individuals, shareholders and the business.

The ground rules are the family's mutually agreed upon policies covering such issues as: who actively participates in the business (do sons/daughters-in-law or second cousins count?); how leadership succession is determined (first born, by gender, favoritism, maybe ability?); stock ownership (equal shares, only participants, voting trust); and compensation.

In establishing ground rules – a Family Creed, Philosophy, Constitution, Charter or whatever – the question is not so much what is decided, but that the decisions are clearly stated and clearly understood. For many years, one family had a strictly enforced family rule that activity in the business was restricted to male descendants – sons-in-law were specifically excluded (if you married the boss's daughter, you were out of a job). Right or wrong from a business point of view, everyone in the family knew the rule and lived by it.

The ground rules that allow families in business to achieve a workable balance among business, family and personal needs are established by compromise and consensus – and consensus is reached through talk. Lots of talk about everything that affects them as individuals, as family, as shareholders and the business in the context of a Family Council.

Some successful families started their Family Council around the dinner table with founders talking about the business, listening to their offspring's' comments, ideas and criticisms – in effect, informally preparing the next generation for participation in the business. It is not purely business or purely family, but a balance of both for a family in business together.

While this informal system may appear to work quite well, it depends on proximity for success when the successor generation reaches adulthood, marries and begins raising families of their own.

An informal system can't accommodate siblings (and their children) who aren't active in the business or who no longer live in the immediate area. The informal system's effectiveness is also limited by everyone's commitment and willingness to participate.

Successful families find ways of turning informal systems of reaching consensus and compromise into a Family Council that in one form or another incorporates:

One family disguised its council meetings – complete with agendas (sent weeks in advance) and minutes – by scheduling them for long weekends. It makes for an irregular meeting schedule, but it's worked for them. Another family meets quarterly, but plans recreational activities as well, reasoning, as one member put it that "if we don't have some fun together as a family, what makes us different from other companies?"

In both cases, however, the council develops: a common understanding and approach to the direction, purpose, stewardship, and ownership of the business; the relation of individuals to the family and the business; the family pride of ownership; and the policies it suggests and advice it gives management.

The most common way of starting a family council, however, begins with a one or two day retreat (see web site near future for article) led by a facilitator to frame ground rules, develop a family mission/aspiration statement, identify areas of concern, schedule future meetings and begin working toward solutions.

The facilitator usually continues with the family through the first year or two of council meetings and then remains "on call" as an expert resource in problem solving and policy-making.

Conclusion

When the rules are clear, communication and contact are maintained, and consensus and compromises can be reached on balancing individual, family, owner and business needs and goals, a family business can remain prosperous and healthy for any number of generations.

It requires time and effort, but a family in business together can use a Family Council to transform 'a clan of kin' into a unified, informed ownership team.

A Family Council is a common sense solution to ensuring continuity of family ownership/control and management.

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