How a family enterprise makes decisions has far-reaching consequences that go well beyond the success of its business activities. By establishing a Family Owners Council, family firms benefit from governance that differentiates between management decisions that primarily serve the business and decisions that take into account the concerns of owners and family members. The importance of a Family Owners Council becomes even more evident and critical as family businesses progress from their early stage of founder-control to sibling partnerships and ultimately, cousin consortiums and multi-generational ownership.
Family Owners Councils are a useful governance forum for addressing the areas of education, shareholder communication, and leadership. For example, a Council can provide a framework for teaching family members about historical milestones and past challenges of the business and the family, while at the same time offering a platform for shareholders and family to provide input on critical ownership decisions. Moreover, Councils allow leadership to reflect on the values, purpose and governance that will directly impact the business and the family’s legacy.
For some families, a Council focuses mostly on family matters and members refer to themselves as a Family Council; for others, a Council’s primary concern is on ownership topics and might choose to refer to themselves as an Owners Council; and in other families, the family selects a different name for this governing body that has a unique and special meaning for the family. In this podcast, we refer to the broader title of Family Owners Councils, recognizing that each family needs to tailor their Council to identify its focus and elect a name that reflects its governance work.
In this episode of LGA Lighthouse, Drs. Katherine Grady and Wendy Ulaszek, Family Business Consultants specializing in continuity planning, governance design, family systems and leadership development at LGA, discuss the advantages of Family Owners Councils, including:
- Identifying the signals that indicate a family’s need to address their management, ownership, and family issues separately — from misaligned discussions at family gatherings and board meetings to cluttered agendas that attempt to combine too many operational and family shareholder decisions.
- Forming governance structures in accordance with a family’s growth and facilitating the transition from informal to formal governance between generations.
- Overcoming the emotional, cognitive, or infrastructural challenges families can face when trying to form an ownership council and how family business consultants can be instrumental in guiding and supporting families as they establish and implement protocols.
- Developing council education initiatives that raise knowledge, communication, and collaboration of family members.
- Prioritizing what, and how the Council communicates with other governance bodies.
- Attracting and inviting future generations to take active leadership roles in the family, its initiatives, and direction.
At its core, a Family Owners Council is a vibrant entity, adding value that, in some form, touches every aspect of a family business. But a Council also inspires those who serve on it, providing a constructive and enjoyable outlet for members to apply their skillsets for the benefit of all shareholders, the business, and the family.