We’ve previously discussed the three components of a family business – the family constitution, family assembly, and family meetings – why they’re important and how they interact with the key governing bodies of the family business. I want to focus on the how-to’s of the family constitution – how to develop one, implement it, and review it.
Often referred to as a family creed or family charter, the family constitution is a statement of principles which outline the family’s commitment to the core values, vision and mission of the business, and sets out the ways in which family members will make decisions affecting ownership and management of the business. The constitution also defines the key governing bodies of the family business and their roles and powers.
You might be convinced that a family constitution’s a good idea. But before you draft one, you’ll no doubt have to convince other family members of the need for a constitution, and that could take some time.
Here’s how you could go about getting buy-in for your family constitution:
Once the family has agreed to press ahead with drafting and rolling out a family constitution, the next step is to develop one. This is no mean feat either – this process could take 12-18 months. How the process unfolds is dependent on your particular family business.
Once you’ve decided on the nature of the process, and the individuals or teams involved, define a time frame and set a schedule for the development of your constitution.
You will also need to agree on decision-making processes and which precise issues you wish the family constitution to address (for example, ownership issues and family values). Once you’ve drafted a constitution, it will be communicated to the family, deliberated upon, and finally, accepted.
Family constitutions are not merely lip service; they are meant to be implemented!
Rolling it out could take anywhere from 6 to 18 months, and it may not always be an easy process. The individual(s) responsible for its implementation depends on whether you opted for a business-first or family-first approach. Remember that it may take time for family members to get used to referring to this formal document when, up until now, they’ve been going about business and attending to family matters which impact the business on an informal, ad hoc basis.
Your family constitution is a living document; it needs periodic review and adjustment, to ensure that it remains relevant. Set review dates – this could be every 3 to 5 years, or when a new generation joins the family business.