What’s the most important thing in the world to you?
For many people, the answer to that question is family. However, we don’t always act on it by protecting and valuing our families through structures that can help them succeed far into the future.
For family businesses, that means that you need family governance. You can’t rely on your business’s corporate governance to help your family succeed. These are two separate types of governance. While corporate governance focuses on managing your company or business, family governance focuses on the family.
But, what is family governance exactly?
Family governance helps families communicate and educate themselves. In addition, family governance helps families work through problems, make plans for the future, and make decisions about the family as it relates to the business or how the business relates to the family.
A good family governance structure has four main parts:
Executive Management: strategy and execution
Board of Directors: control & advise management, investment, performance
Shareholders Council: look out for the interests of the business owners, protect family wealth and dividends
Family Council: family cohesion, family values and foundations, “emotional dividends”
These four areas help cover all areas of needs that your family and the business have. That way, working on each of the areas, you can make sure that a strong foundation is set to propel the family and business far into the future.
Families like Mitzi Perdue’s family have gone through the family governance process. Perdue’s father was the founder of the Sheraton Hotel Chain and her husband was the owner of Perdue Chicken. Mitzi Perdue has also led her own business focused on wine grapes. Perdue’s family governance plan has helped Mitzi lead her family’s 276 year history of family history into the future.
Any family with a family business can benefit from family governance. Family governance can be tailored to meet your unique needs. No two family governance plans are alike, as each one is developed to achieve the different goals that each family has.
What is the process like for creating family governance?
It all starts with a diagnostic process to evaluate the financial and human capital in the family. This is step 1. In this step, interviews are conducted to help learn more about the family, its individuals, collective values, and more.
Step 2 involves the creation of the family council and the family strategy. In this step, roles and responsibilities for the members of the family related to achieving the family’s mission are defined. In addition, protocols for decision-making processes are defined. Finally, succession plans and family governance policies are made.
Step 3 of the creation of family governance involves sustainability and making all elements of the family governance structure work. In this step, plans and strategies are built to help the sustainability of the family governance.
Without a plan and a structure in place, it can be difficult to hold a multigenerational family together. However, family governance can help take your family business from one generation on to many generations to come!
Are you ready to build your family’s family governance? Elaine King has worked with over 1,200 families to help them plan for a successful future. Contact her to set up an appointment today!