Carmen Bianchi

Family Business Associates

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(858) 793-2445 or (858) 922-3155

Family Business Governance

In family businesses (companies whose ownership is controlled by a single family) and other kinds of family enterprises including family foundations and family investment funds, the lack of effective governance is a major cause of organizational problems. Seeing many businesses succeed and fail, it is clear that every business able to improve governance reaped lasting benefits.

If you are in a family enterprise, you need to learn the basics of governance and apply the best practices that exist in family business governance. But even non-family business leaders can benefit from considering how the problems of a family enterprise and non-family business are often the same. Personalities, passions, and power, after all, are at the heart of any enterprise.

No organization is effective for long without doing these things. You should measure the effectiveness of your governance system by these outcomes, not by the boards and councils you can put in place. Effective governance can be done in an informal, casual manner. Or it might require formal structures (e.g. boards, councils) and processes (e.g. agendas, voting). The particular kinds of structures in your governance system can vary as long as your organization is producing the two outcomes described above.

If your organization is doing the above two activities in an informal, casual way, don’t change. But if your organization does not have these outcomes—a clear sense of direction, clear values, well-understood, sensible policies, does not assemble the right people in a timely way to discuss and decide the big issues facing your organization—then your governance system is flawed, should be improved, and probably needs to be made more formal. Given how difficult it is for most people to confront especially sensitive issues and to plan ahead, some degree of formality often helps people focus on their issues, work toward their goals, and resolve their differences. What is clear in my work with family enterprises is that a few well-composed and well-managed governance structures greatly help your chances of being effectively governed.

The world of family enterprise generates a mixture of business, family and ownership concerns that can make these systems emotionally charged environments for planning and problem solving. In these systems individuals must manage issues within and across three overlapping groups: the family, the business, and the ownership group. The overlap among the three groups often leads to differing points of view among individuals depending on their location in the three circles. For example, family shareholders not employed in the business often have different views about the proper level of dividends than do their relative owners who work in the business. Both viewpoints are typically legitimate and must be reconciled in a respectful way to set direction for the enterprise and preserve harmony in the family. To effectively manage business, family and ownership concerns requires communication and decision making within and across the family, the business, and the ownership groups.

Contact Us Today for more information on how we might be able to help your Family or Closely held Business.

Family Business Services

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Family Wealth Advising

Seminars

Estate Planning

Conflict Resolution

Consulting

Organizational Structures

Family Councils

Creating Family Creeds

Family Business Governance Structures

Entry and Exit Strategies

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