The management of the complexity of family businesses is often referred to in the literature with the somewhat cumbersome term “family business governance”. We stick to this term because it is more comprehensive than “family business management”. What is meant is a consistent view of the connection between the three systems family – company – shareholder and their integration in every corporate decision. This includes the definition of a family strategy, which may, for example, be reflected in a set of rules adopted by the family, but it also includes all issues of concrete family management, the regulation of controversial matters and the development of routines that connect the owners, the family, and the company.
In many cases, the members of the entrepreneurial family lack a common understanding of the successful cross-generational continuation of the family business. By establishing family governance, the sense of togetherness of the founder family members and their identification with the company is strengthened and consolidated.
The first step is to clarify the affiliation with the entrepreneurial family. Who plays a role in the decisions and processes? And who does not? In addition, family values, goals, and mission statements are important elements that require clarity. It is also necessary to define communication principles and platforms as well as to develop a set of rules for conflict management within the entrepreneurial family that contains binding guidelines for all involved. In this way, the handling of conflicts can be regulated and the emergence of new conflicts can be avoided. The self-image of the entrepreneurial family is also an essential aspect; a so-called “family charter” can be designed.
Family businesses are so diverse that there is not one family governance or one process for developing a family charter. It requires an individual process that can take between half a year and a full year, depending on the complexity of the relationships, differences of opinion, and conflicts. This process involves identifying the values and goals of the family and those of the company to create a coherent mission statement based on these values and goals.
The result is a cross-generational agreement within the owner family and the fact that all family members identify with the course of the family business. On this basis, the further development of the company can be defined. It’s worth it: studies show that family businesses with a family strategy achieve significantly higher returns.
Frédéric SedlákSenior Consultant | HR ManagementWe are always at your service+49 4102 69 93 22
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