Whether we like it or not, families are comprised of emotional beings all connected in a system.  Ups and downs or disruption in the system will often affect several family members – sometimes temporarily, others permanently – delaying the decision-making process.  Lack of trust, differences in opinions, and difficulties in honoring parents’ wishes are just a few examples that demonstrate the need for a collaborative structure. 

The process of creating a collaborative decision-making structure to serve performance and transparency is often referred as “family governance.”  Realizing that families are unique systems, each structure is personalized.  However, most successful families share three essential building blocks: 1) shared values and mission; 2) separate structures for family and business; and 3) actionable plans.  

Shared values and mission

Identifying both individual and shared values is the first building block for the decision-making process.  Each family member needs to agree with and be aware of the leading principle that moves the family as a system, what is shared as a unit and what the legacy of the family is.  For example, some members may value health over wealth due to illness in the family’s history; others may value education over wealth due to a keen spirit of entrepreneurship in the history of the family.  Understanding the family of origin and the values passed through generations facilitates the discovery of shared values.  This process will lead to creating a mission statement. 

A mission statement reflects how the individuals will evolve as a family and how they will be remembered.  A simple mission statement may say, for instance, “We will feed our entrepreneurial spirit objectively.” Alternatively, it could be expressed in more detail: “We will respect our individual uniqueness, be open and honest with each other, love each other, believe in each other and encourage spiritual growth so all family members can use their talents to bless others and continue to build upon our legacy and values.”

Structures for family and business

Families that share a business together almost always find it challenging to separate the business from the family, often confusing the performance of the business with family relationships or bringing in family discussions to the business. Putting separate structures in place may be necessary to distinguish what issues affect the business and which ones affect the family.

For business structures, a shareholder’s agreement should be created, detailing the management and succession. For family structures, a family constitution reflecting the agreed upon expectations of all family members and its legacy could be helpful.  For example, a shareholder’s agreement will mention liquidity events, voting rights and employment policies, whereas a family constitution will include collective expectations of members in terms of education, risk management and conflict resolution.  Some families choose to do a short version of each, not necessarily having to complete more detailed documents.  

Actionable Plans

Identifying shared values, creating a mission statement and separating the business from family matters could take months and sometimes years.  Many years ago, a client told me that a family governance expert said, “Rushing through this process will lose its effectiveness in time.” Having experienced all of these building blocks through working with hundreds of families, I can now attest that the statement is correct.  The best documents are also reviewed periodically to reflect the rising members’ opinions.

An action plan with divided responsibilities, active participation and clear objectives is strongly recommended for a successful process.  For example, a family may choose to rotate the responsibility of leading the meeting each time the members get together. The use of technology such as Zoom, Skype or GoToMeeting can also keep the process flowing when members are in different cities, and there should be no more than 3 to 6 months between meetings, calls or virtual get-togethers to address issues in the ongoing pending agenda.

Families around the world laugh, cry, hug, fight and love each other.  Just like any system, emotions are cyclical.  Family governance empowers members to have the human and financial capacity to grow and evolve together if they choose.  Many advisors can facilitate this process; however, a Certified Financial Planner™ professional can help you tremendously by taking a holistic approach.