Establishing a Family Council

Establishing a Family Council

The Jim Moran Institute for Global Entrepreneurship

As the family business grows there are necessarily more people involved and there is a requisite need for more formal governance structures. The family council is one such structure that can be effectively utilized to provide a forum for family communication and clarification of business decisions. Why is this so important? Communication in any organization is important to convey information and to promote understanding. In a family business there are just too many issues pertaining to both family and business to leave them to chance meetings. By establishing a family council, family business members recognize that openness and involvement, and sharing of ideas is critical.

This does not mean that family businesses do not communicate. The problem is that communication is often selective, with only a few family members involved. Consider the following situation where the daughter of an entrepreneur is given a management position in the family business upon graduation from college. However, when the son graduates from college he has to take a sales position before being considered for management. He has two options: not say anything and build resentment or risk alienating his sister by speaking to another family member. Oftentimes members of a family business incorrectly assume that the only way to keep the peace is to avoid talking about issues that are upsetting to them. If a family council had been established, the family member would have had an effective forum to discuss the situation and family members could address the underlying issue which is the need to establish employment policies for family members who enter the business. A critical task for the family council is to develop and recommend policies to the BOD that deal with issues that concern both the family and the business . Another critical task of the family forum is to clarify business decisions. For example, family members may be concerned about the owner’s decision to eliminate several positions in the company. Family members may not be aware that the company has lost a major account. The concerns of family members could be dispelled if the owner shared this information at the council meeting. More…

Practicing as a Family Business Consultant

Practicing as a Family Business Consultant
by Dennis T. Jaffe, Ph.D.
Saybrook Graduate School, and the Aspen Family Business Group

Mario S., CEO of Altman Properties, calls and says we need to talk. He is entering his fourth year as leader of the family’s real estate empire that dominates not just our own skyline, but those of several cities around the world. Wearing a denim shirt and Jerry Garcia tie, Mario picks me up for lunch the next day in his Bronco. He takes me to the trendiest new restaurant in town. At 45, Mario is tall, wiry, intense, and self-assured. It seems perfectly appropriate that nearly every person we pass on the way to our table greets him by name.

I know from the newspaper that he is in the midst of negotiating to sell partnership in several hotels to a foreign investor, and that unlike many of his contemporaries in real estate, he is doing quite well. But that isn’t what the urgency is about. He launches right into it. His brother-in-law Bob, 35, married to Mario’s younger sister (who also works in the business although she is currently on maternity leave), and he have had a blow-up. Bob, who manages some of the larger properties, came into his office a few days before, and in a loud voice, proceeded to tell Mario that he had a real problems in the company: he was burning his people out, not paying them enough, and his management style was terrible. Mario asked him to go into more detail. Bob said he couldn’t, because he couldn’t violate the confidentiality of the people he talked to. More…