In its most simple terms, governance is a set of processes for making decisions. Family business governance, then, refers to the processes in place to govern decisions made around the family, the business, and the intersection of the two. Frequently, governance is associated with complex committees, policies, and procedures, which may be appropriate for families and family businesses of a certain size. However, in other cases, family business governance is a simplified, disciplined process that is well-structured and balanced.

Family business governance structures usually serve two constituencies: the family and the business. A well-developed, implemented structure provides a framework for decisions and effective communication, unique to the family and business. At their best, governance systems create harmony between constituents.

 

From the perspective of the family, family business governance serves to:

• Provide a formal forum for routine family and family business matters.

• Gain transparency into the business, its operations, performance, and strategy.

• Communicate on key issues, both within the business and outside of its scope.

• Foster the development of new ideas for the family (philanthropy, family trips, policies, and so forth) and the business.

 

From the perspective of the business, family business governance serves to:

• Create a forum for communication, “funneling” ideas from the family to the business and vice versa.

• Provide a consistent voice from the family for the business’s adherence to the mission, vision, and strategy of the firm and the family.

• Identify and groom talent within the family for positions within the business.