Family Business Blog
Family Charter Development Process
A Family Charter (or Family Constitution) is a document that is a key element in setting out the relationship between the business and the family. It defines the 'rules of the game'.
The reality is though, you will never think of every conceivable situation that could arise in the future. So it's not so much about the specific rules that it contains but the skills the family develop during the process of creating the document that are the true value.
To help you get started, we've outlined below the methodology we use when we work with our family business clients to develop a robust Family Business Charter..
The reality is though, you will never think of every conceivable situation that could arise in the future. So it's not so much about the specific rules that it contains but the skills the family develop during the process of creating the document that are the true value.
To help you get started, we've outlined below the methodology we use when we work with our family business clients to develop a robust Family Business Charter..
The Foundation
A family business is a complex structure as the values important to a family are not the same as those that apply in the business world. This often leads to confusion, tension and disruption when sensitive issues arise. Are they to be dealt with under the family’s value system or those of the business world?
Family Values – each family has a set of values that are important to it. These will include concepts such as love, support for family members, respect, honesty, integrity
Business values – though there will be some overlap, will also include values such as a commitment to growth, continuous improvement, excellence, customer focus.
Family Business – Values and Vision – These two often conflicting value sets need to be reconciled into a set of values applicable to the family business as an entity in its own right. These values help the family to identify a uniting common vision for the family business.
Structures – are then developed to govern the Business System and the Family System and to control the interaction between them. There needs to be an effective functioning Board for the business and a Family Council which manages family issues that impact on the business. The Charter or Constitution becomes the governing document for the Family Council.
The PoliciesTypically the Family Charter will contain a number of key elements including –
MaintenanceHaving developed the Charter two protective mechanisms are required to ensure that it lasts.
Renew – invariably not all issues will be covered in the first draft. More importantly constant change within the family, the business environment and society mean that constant regular update is required. What process will you establish to ensure that the Charter remains current?
Imbue – the document itself will have little impact unless its message and the principles that underlie it are imbued into the hearts and minds of all family members. How will you ensure this happens? How will children and in-laws be introduced to the family’s values, principles and codes of practice?
With these support structures in place the content contained in the Charter will be secured and it will become a living document that adapts to the needs of the family in business over time.
Family Values – each family has a set of values that are important to it. These will include concepts such as love, support for family members, respect, honesty, integrity
Business values – though there will be some overlap, will also include values such as a commitment to growth, continuous improvement, excellence, customer focus.
Family Business – Values and Vision – These two often conflicting value sets need to be reconciled into a set of values applicable to the family business as an entity in its own right. These values help the family to identify a uniting common vision for the family business.
Structures – are then developed to govern the Business System and the Family System and to control the interaction between them. There needs to be an effective functioning Board for the business and a Family Council which manages family issues that impact on the business. The Charter or Constitution becomes the governing document for the Family Council.
The PoliciesTypically the Family Charter will contain a number of key elements including –
- Statement of family values, mission and objectives
- History, background, overview of the family business
- Policies and codes of practice on issues such as –
- Ownership
- Governance
- Employment
- Compensation
- Career Opportunities
- Leadership
- Succession
- Communication and Conflict Management
- Rules for updating and reviewing the Family Charter.
MaintenanceHaving developed the Charter two protective mechanisms are required to ensure that it lasts.
Renew – invariably not all issues will be covered in the first draft. More importantly constant change within the family, the business environment and society mean that constant regular update is required. What process will you establish to ensure that the Charter remains current?
Imbue – the document itself will have little impact unless its message and the principles that underlie it are imbued into the hearts and minds of all family members. How will you ensure this happens? How will children and in-laws be introduced to the family’s values, principles and codes of practice?
With these support structures in place the content contained in the Charter will be secured and it will become a living document that adapts to the needs of the family in business over time.
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