What is a Family Council?
A Family Council can form an effective and impactful communication bridge between the Family Enterprise and the family itself.
When do you need a Family Council?
As your family and business grow it may be necessary to introduce more formal communication forums to ensure that there is effective and efficient communication between the family and the business.
A Family Council is one such forum that may be able to help to improve the communication in your family business.
The circumstances under which a Family Council may help are varied and depend on the circumstances of your family and business.
One example of when the introduction of this forum has been effective has been where a family I was working with had several family members that took on roles as non-executive directors within their family business. Initially this was one spouse of the Managing Director and owner of the business. This set a precedent for future spouses to also join the Board and eventually this led to an unwieldy, unfocussed and dysfunctional Board.
The intention was to ensure that those in the family had a voice at Board level and were able to provide input to their family business. Initially this was successful but soon became an issue. It was at this point that I became involved.
In this situation the introduction of a group to represent the views of the wider family and the addition of a ‘communication bridge’ between the Family Council and the Board helped to create the right boundaries in the business, with the right people having the right conversations in the right place at the right time!
There are also occasions when a Family Council is needed as the business passes from one generation to another. An example is a business passing from second to third generation. Some in the third generation will become future owners, some will work in the business and others will have no direct involvement. However, each individual in the third generation was keen to ensure that they were aware of what was happening with the family enterprise and to ensure that they were kept informed of how the business was doing.
Those who were to become future owners needed information relevant to their future roles, those that were going to work in the business also needed relevant information and as they were from different households, with some in different parts of the Country, the introduction of a Family Council with representation from each family branch allowed the right level of communication (for this family) to be introduced in the right forum.
Who sits on a Family Council?
Chair of the Family Council
An important role of the Family Council is to ensure effective and efficient communication with the Board of the Family Business and the wider family ‘system’ around that enterprise.
As such you would typically appoint an individual to be the Chair of the Family Council. It may be that they also take up a role on the Board as a Non-Executive Director to represent the views of the Family Council at Board level.
This Chairperson has a vital role to play in the effectiveness of the Family Council and as such should be carefully selected. They will need to possess great communication skills, with an understanding and sympathy to the needs and wants of not just the family but also the business.
The Board will want constructive input without feeling as though their roles are restricted in running the business.
Likewise the family will want to ensure that their views are heard by the Board.
The Chair of the Family Council will be required to communicate messages from the Board to the wider family and have to deal with the potentially differing views and priorities of individual family members and family branches.
It is an important role and one that again may be circulated every 5 years or so to ensure it is kept fresh.
How to Establish a Family Council
As with most things that I speak about, the key to a successful outcome when trying to implement something within a family business is to really spend some time understanding what it is you are trying to achieve and then making sure that the most appropriate solution is put in place.
This is no different with a Family Council. Start with what current or future issue or challenge you are trying to solve or avoid.
If you feel that a Family Council could help you to either solve or avoid a particular challenge, the next step would be to ensure that you are clear on what roles and responsibilities you want there to be on the Council.
You can then start the process of appointing people to the Council and the all important role of the Chair can be decided.
You would typically lay out, perhaps in your Family Charter, the way in which the Family Council will function, what rights and authority they have in certain circumstances and how consensus should be reached if there is a difference of opinion.
Help is available
For many family businesses the introduction of family governance is a big step and one that can seem daunting. You may not know where best to start or how to go about deciding what should be included within family governance.
If this is you, please get in touch, I am here to help. I am happy to arrange a call to discuss if family governance or a Family Council is right for your business.
This episode of The Family Business Podcast covers more of the details of a Family Council. Why not have a listen, and subscribe so you don’t miss future episodes.
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