HOW TO DESIGN AN EFFECTIVE FAMILY COUNCIL
Updated: Apr 28, 2021
Family councils can be structured in a variety of ways. Families are well served by adopting a form that works best for their particular situation. Because of the difficulty, some families have in establishing a formal channel of communication – particularly when healthy communication has been largely absent, it is often a good idea to engage a professional facilitator, such as a trained family business consultant or psychologist, to help establish a council. A facilitator can be especially effective in introducing the council concept to a family retreat. Here are four suggestions for establishing an effective council.
1. Include all adult family members in the council.
Unlike a board of directors, which typically should not include all family members, the council is a vehicle to ensure that all family members have access to effective channels of communication. A council usually works best when it is open to all family members, who have reached a minimum age, perhaps 21. Therefore, active and inactive members who own an interest in the business, and their spouses and children (if old enough), are all likely candidates for membership. Non-family members may be appropriate guests of the council from time to time to address particular subjects of interest. Ordinarily, non-family members probably should not be regular council members so that the family may more freely address confidential family issues without concern for appearances in front of non-family members.
2. Designate council representatives for the board of directors.
All council members should not be involved with the business. Instead, the council might designate one or several of its members to serve on the family business’s board of directors. This structure ensures that the family perspective is duly considered but does not dictate when and how business decisions should be made. Governance of the business thus remains in the hands of capable business leaders and doesn’t rest exclusively with family, who may be well-intentioned but nevertheless unsophisticated in the world of business. In effect, the family council serves as an advisory board to the family business. A well-functioning council can help push and family and its business beyond traditional and conservative thinking by serving as a spark for creativity and innovation, thereby perhaps helping a family business become or remain prosperous in an extremely competitive world.
3. Don’t be afraid to start slowly.
Families who have historically emphasised the importance of open and candid communication may have some initial difficulty in opening discussion on important yet sensitive subjects. Many families have found that by first addressing relatively non-controversial matters, they can pave the way for later discussion on the hard subjects. Typically, a good way to begin a dialogue is to have one or more senior family members review the history of the family business. This review can help remind family members of the original vision the leaders had for their family and the business. It may be desirable to retain the services of a professional to help facilitate early council discussions. Psychologists and consultants experienced with family businesses may be adept at breaking down long-established communication barriers that might otherwise stymie a council’s effectiveness.
4. Establish ground rules for your council.
Effective councils often have ground rules that are designed to ensure that all family members understand how the council operates. These rules may specify which member shall lead the council and what the leader’s responsibilities are, such as determining an agenda and scheduling regular meetings. Whether the leadership position should be rotated can also be set forth in the ground rules.
In order to be successful, a council must meet on a regular basis; it is not a one-time family reunion or retreat. The family may wish to specify in its ground rules when meetings are to be held in order to emphasis this regularity. Instituting a regular forum is essential, since the family and the business are constantly evolving, requiring frequent updates. While every family should consider which ground rules work best for its council, the rules suggested in the list below may be useful. Other rules also can be developed as each family sees fit.
FAMILY COUNCIL GROUND RULES
Council members agree to remain focused on the meeting agenda and avoid straying from the topic at hand.
Council members shall be supplied with relevant information so they can make informed decisions on matters of interest.
Council members are encouraged to be honest and, as appropriate, consider the use of anonymous communication from time to time if necessary, to address particularly sensitive subjects.
The council and its members agree to follow up their decisions with appropriate action.
Council members acknowledge that good communication starts with good listening and agree to work on listening to each other.
Council members agree that, whenever possible, they will approach issues from an appreciative perspective – focusing on the opportunities they have to build their business together – rather than from a “problem solving” perspective, in order to help build family unity.
Indeed, some families find that they are better served by using a more informal council, in which relatives meet when there is a reason to and the agenda is not fixed. The degree of formality of your council is probably best determined in conjunction with your family and its professional advisers.
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