“Governance” can be a daunting term for enterprising families. It tends to conjure up images of a large group of grey-haired “suits” sitting around a long table, staring at an executive, expecting some fancy graphs with lines shooting up and to the right.
The fact is that governance is simply a process for having discussions about how things are done (which are often difficult when family is involved) and then making decisions everyone can stick to. Research shows clearly that healthy, effective communication is essential for the multi-generational success of family businesses.
For some of you, this may be relatively new. Maybe you’ve read about it, heard about it and thought about it, but haven’t taken many (any?) steps yet. For others, you may have a number of governance structures in place. In either case, here is a list of simple ideas to get started or move further along. As with anything new, take one step at a time and add more as you feel comfortable.
Have a meeting with all family members who work in the business and discuss:
How well is conflict managed and can it be improved? (Remember, conflict is unavoidable; the trick is in how you manage it.)
Is it clear how the decision is made for another family member to enter the business?
Are compensation policies in place for family members and are they fair and transparent?
For family members committed to the business, are there development plans with mentors assigned? If not, are you willing to put these in place?
Gather all the family shareholders and go over the shareholders’ agreement. Discuss the terms and clauses and, if necessary, compile a list of questions for your attorney to explain and discuss with you. Then list issues for discussion and have a follow-up meeting.
No shareholders agreement? Agree on someone to do research and present a summary to the family. Start a discussion about topics such as when shares can be sold and to whom as well as how they will be priced.
Family members by marriage (spouses, brothers-in-law, etc.) can feel left out when not included in business decisions that greatly affect their lives. They may have gems of insight into how the business can be improved (especially as it relates to family/business interplay). Gather them, along with family members in the business, and have a meeting to get feedback from them. Brainstorm ideas for making improvements. Make sure these “non-related” relatives are felt welcome in word and deed.
What is the lesson?
Enterprising Families: Just because you have a meeting to focus on decision-making, doesn’t mean decisions need to be made at each meeting. Particularly with important decisions, take enough time so all stakeholders feel heard and understand the issues. If things feel too intense, reach out for an experienced professional to help you through it.
Advisors to Enterprising Families: Encourage your clients to become more formal with their communication and decision-making, one step at a time. These simple ideas can get them going and are very likely to avoid a great deal of misunderstanding and conflict. They will thank you for it.