Seven Steps to an Effective Family Council

Good governance that goes beyond the family business can preserve your family’s legacy.

This piece was originally printed by Family Business Magazine.

Successful family business leaders focus on their business governance by creating business boards. Effective boards drive smarter decision-making in family businesses and, ultimately, enable family business leaders to professionalize their enterprises and create better, more sustainable results. In addition to bringing industry insights to and sharing individual perspectives with the family business, independent board members also regularly balance — and therefore lessen —  the potential impact of the long-standing and complicated dynamics that can exist among family leaders in the business. This can be incredibly powerful for your family business, but what about your family’s legacy beyond the business?

Successful family leaders recognize that their businesses are only a piece of their families’ story. Family councils can serve as equally powerful stabilizing structures for enterprising families because they provide a legacy-focused complement to business boards. Family councils provide the critical governance to support a family’s affairs well beyond the business, particularly when it is a multigeneration, multi-branch legacy family.

What is a family council, and how can family leaders leverage a family council to keep their family connected over time? What, specifically, must family councils do to be effective and enable enterprising legacy families to thrive from generation to generation?

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Completing the following steps will help lay a strong foundation for generational success.

  1. Draft family council charters to guide a family’s efforts, documenting the primary purpose, functions and goals of the council. Charters also capture the key processes family councils establish to manage their efforts. For example, what is the focus of your family council? Are you going to manage the employment and onboarding of any new family hires in the business, or perhaps focus on education for all rising-generation members beyond those who might work in the family business? Based on that focus, who should serve on your family council, and how will you elect/appoint them? How are you going to make decisions together? Answering questions like these is an essential foundational step to take before your council even begins.
  2. Institute formal protocols around who can serve on the council and outline clear expectations for those council members. How many council members do you want/need? How often and where are they going to meet? Annually or perhaps semi-annually? In the families’ hometown or perhaps a more exotic destination the family will enjoy? Are there going to be term limits for those who serve on the family council? What committees are you going to establish, and who is going to support and chair those efforts? These are all important considerations before inviting or selecting anybody to be a member of your council. In the end, this isn’t a popularity contest, nor is it about power dynamics that might exist within a family. The most effective council members are those who are trusted by the whole family and see themselves as serving the entire family, not just their direct family branches or their own interests. To that end, family councils should include rising-generation members as well as married-in partners who are qualified and capable of contributing. As many family branches as possible should be represented.
  3. Clearly identify the connection between the family council and the business board. Not all families still have operating companies or business boards. However, for those that do, it’s important to highlight how these complementary groups will support and work with each other. What decisions are your board directors going to make, and what decisions will you leave to your family council leaders? Family councils generally don’t take “ownership positions” with regard to the business or any business decisions. Rather, they typically focus on family matters beyond the business. What about the hiring, development and termination of family members in the family business? This is often an area in which the family council does engage, so it’s extremely helpful to review this when instituting a new family council and before potentially creating any conflict between your governing bodies.
  4. Drive education and development for the rising generation. Family councils often serve as the primary vehicle for education within a family. They design apprenticeship, mentoring and internship programs across the family’s businesses, introduce new communication and leadership tools to rising-generation members and expose family members to topics like the family’s core values, philanthropy and beneficial ownership in addition to core business topics like net profit and EBITDA. This not only serves to provide young family members with the knowledge and skills they might need as they mature but also often leads to greater engagement with members across the family. Engagement is key to helping the rising generation gain invaluable leadership experience in a safe and supportive manner as they assume various roles within the family. It also serves to preserve the family’s legacy and provide greater continuity from generation to generation.
  5. Establish clear practices for managing family council meetings. This includes developing a calendar and setting a schedule for meetings, especially in-person gatherings, at least a year in advance. Some family members may experience competing priorities and struggle to participate more fully from time to time. Having an established calendar will help minimize any conflict. Embracing more of an open environment  —  by, for example, holding a family council meeting as part of a broader annual family retreat —  can also encourage other family members to be present and observe the council’s conversations. Even when meetings are closed, family councils can still make their materials available to the whole family, publishing their agendas and meeting minutes in an accessible family portal or intranet site. Transparency is paramount for family members to stay informed about the council’s activities and any decisions they might make.
  6. Evaluate family council members’ performance over time and refine their practices as needed. Self-evaluation is imperative not only to continually improve performance for a family council but also to ensure that established practices are being followed. Self-evaluation in this regard might entail reviewing the council’s charter annually and determining if certain practices need to be modified. More comprehensive evaluation processes might also include surveying family members at large to gauge how well the council is serving the family. This can be extremely beneficial as the family’s principals and rising-generation members grow older and as their needs evolve.
  7. Clarify the distinction between simply being a member of the family and being a member of the council. This may be one of the most important practices to set family councils up for success. Everybody is a member of the family, but not everybody is necessarily a member of the family council. Family councils should be representative of the broader families they serve, but family councils cannot be effective unless they are small enough to hold themselves accountable and fulfill their commitments. When families consider everybody to be part of the family council, they generally no longer have a family council. They have a family assembly and hold family gatherings, like family reunions and annual retreats. These events can be extremely beneficial for legacy families, but it simply isn’t the same as establishing a true family council.

This may seem like a lot to consider. Please know there is no “one size fits all” for any family or their family council. Every family is unique, and family members can work together to determine the right approach.

What will work best for your family? It truly is about what is going to best serve your family from generation to generation and enable you all to preserve your family’s rich legacy over time.

About the Author(s)

Jeremy Lurey

Jeremy S. Lurey, Ph.D., is a family advisor and leadership coach at Family Legacy 1st.


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