Family Business & Succession
By James Crown, Chief Executive Officer, Knowledge Group Consulting

Corporate governance issues and the role of the Board are complex, critical and often very difficult when the company is owned by a family and moves from one generation to the next. The successful transition through generations, from founder to siblings and on to cousin consortia can be successfully managed and governance established by some simple structures.

Our model is built around a workshop which produces the vital components needed: an affirmation of Family Values, a Family Business Philosophy, and a Family Vision. These provide a shared commitment and goals for the future.

The workshop also acknowledges the need for a Family Forum, a Family Council and a Family Charter. There are also issues to be covered such as the relationship of family members to non-family company managers, the involvement of family members in management and worker positions within the company, and ultimately, the succession of key positions including the Chief Executive Officer.

At the workshop some basic strategies are needed such as: conducting open and frank discussions, recognising the need for consensus, allowing room for personal idiosyncrasies, ensuring your position is heard and understood, and being polite and recognising the rights of all to be heard and understood.
Let's look at the role of each of the main components.

Family Values - The personal and business values of each member of the family will impact the future; is this business an opportunity to create long-term wealth? A source of pride based on the family's legacy of achievement? A source of family careers? The values that a family shares help individual members to relate to the family group and to develop a sense of shared purpose. Values are linked to commitment across generations, or across branches of the family.

Business Philosophy - What comes first? The Family? The Business? Or some shared approach that looks for a balance between the needs of both family and business. The discussion and decisions made here will impact how the company is run. For example, a family first philosophy means there will always be a job for a family member who wants one, regardless of skill or opening; business first means a family member will only be employed if the skills of the person meet the needs of the position and they are the best candidate.

Family Vision - A family vision describes the desired future state for the family and its relationship to the business. It often has a time frame and has a vivid description of the positive outcomes the family seeks. The business philosophy and values both shape the development of the family's vision. The vision provides the company's management team - both family and non-family - with a target towards which their objectives and strategies will be aimed.

Family Forum - As the family grows larger, it becomes a forum for discussion, for ongoing communication and as a meeting that encourage family participation in planning, problem solving and decision making. It is a vehicle for gaining needed consensus on critical family issues. It should reflect the family's concern for everyone's well-being.

Family Council - The large, dispersed family may not be able to meet often and thus elects a smaller group to represent the interests of the family. This smaller council meets more often, interacts with the Board and formalises the planning and decision making actions.

Family Charter - The charter represents the family's shared and agreed understanding of the rules that provide consistency over time and deal with such issues as employment, ownership, and family participation relationships and arrangements. The Charter is not complicated. A simple format is best: The Rule (or the policy) is a clear statement about the topic. The Reason is an additional statement that explains why the rule (policy) is in place, and The Process (if required) is the steps to be taken to meet the conditions of the rule.

One of the advantages of having a clear model to follow is that it can assist in clarifying arrangements between the Management Team and the Family. Sources of conflict can result when junior managers who are members of the family run to mother or father every time they disagree with the decision of a senior non-family manager. Having the council in place provides a sounding board and perhaps mentoring facility for these younger family members. The Council's chairman can then interact with either the Board or the CEO, thus maintaining the integrity of the management structure.

The strategic planning process for the future can incorporate the family, usually through Board and Council participation, and when the time comes the Succession Planning for senior executives and CEO can be made much easier by having in place tested and used components by which decisions can be discussed, understood and ratified.

Click on image to enlarge

Download Article - (19 KB)
Right click & choose Save As