When it comes to maximizing family business potential, “structure” is probably not the first thing that comes to mind. Yet most family companies highly value the benefits that come with having the right structures in place to support the objectives of both the business and the family; benefits such as improving strategy, preventing conflict, developing successors, fostering teamwork, and creating operational efficiencies.
Just as a well-laid foundation is essential to the integrity of a building, the following four structures support the stability and sustainability of a family business.
- Family Meetings – Whether occasional informal discussions or regular family councils with a planned agenda, family meetings can help build healthy family relationships and a stronger business. Holding regular family meetings is one of the most important steps you can take to ensure perpetuation of your family enterprise. As a way of getting started, consider asking family members what they’re curious about or questions they’d like to have answered at a family meeting. Also give thought to the balance of meetings – spend time on sharing information and developing skills as well as just having fun together.
- Board of Directors / Advisory Board – According to the most recent American Family Business Survey, family businesses with active boards tend to achieve more rapid growth, disciplined business practices and intentional strategic planning. Boards provide additional expertise, objectivity, accountability and insights. They are a tremendous asset for any family business, and especially so for those moving through ownership and leadership transitions.
- Family Agreements – More and more family businesses are adopting family agreements as a way to create shared purpose, clarify expectations for the future, and prevent misunderstandings before they become deep conflicts. Family agreements can be as short as a one-page snapshot of the family’s history and values, or as long as a dozen pages of provisions. Common types of family agreements include:
- Family Mission Statement
- Shareholders’ Agreement
- Family Code of Conduct
- Family Constitution
- Family Philanthropy Guide
- Family Business Policies – As with the other structures discussed above, the goal of developing family policies is to anticipate and discuss future issues before they become issues. Problems are inevitable – they’re a natural part of evolution and growth. The most successful family businesses anticipate problems and engage family members in discussing and even documenting how they will handle future issues. While by no means an exhaustive list, here are some policy categories that many families explore:
- Family participation and employment
- Compensation and dividends
- Ownership transfer / shares redemption
- Ownership rights and responsibilities
- Work performance
- Retirement
- Ethics
- Family behavior
“What’s the difference between an Advisory Board and a Board of Directors?”
| Advisory Board | Board of Directors |
| Informal group of experts and advisors, usually selected by the CEO and management team | Elected by the shareholders and subject to the corporate by-laws for established terms |
| Cannot be held liable for mistakes made in their duties | Fiduciary duty; can be held personally liable |
