Before embarking on writing a family constitution

Before embarking on writing a family constitution

With the recent focus on family constitutions (also known as “charters” or “protocols”); some business families feel that these are magic formula that will help them stay in business together, forever, no matter what.

Adjunct Professor of Entrepreneurship and Family Enterprise, INSEAD

KPMG contributor


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Certainly, family constitutions can be very useful and can help to reduce the likelihood of conflicts by making explicit the implicit and by laying down clear rules. But if the families have not, during the development process, discussed the real issues, then the whole exercise may prove ineffective.

Take the example of a family who called a KPMG member firm, because a new generation of cousins was now leading and owning the company; the family leaders wanted to invite their cousins to write down their values and aims for the company. The exercise was to be the “founding act” of their generation, and most likely a key element of a future family constitution. Listening to the leaders, it became clear that there were tensions never talked about in the family. So, instead of focusing the planned family meeting on writing values, they agreed to open up and ask family members: “What are the questions that you think we should be working on?” Using participative methods, each person listed as many ideas as they saw fit, that were then posted and grouped by theme. They identified several issues: communication (typical with most families), the role of women (ditto!), governance, next generation, etc. Values were one topic, but certainly not the most pressing: the most urgent was communication and the frustrations of women in the family who’d not been treated like their brothers.

KPMG member firms have also seen several smaller families (first and second generation) where the father had pressured his children to write a constitution. In one instance, he wanted examples of other families’ charters so as to quickly duplicate what suited them. In another example, a father suggested that each of the children write a chapter and they collate everything. None of these approaches worked, because they deprived the children of any authentic communication about their past experiences, childhood and work conflicts, and dreams for the future.

When a family says: “We need a family charter”, the family is ready to work on new dynamics, often a changeover of generations.

A family charter is useful once finalized and agreed upon: it formalizes agreements and serves as reference for future decisions and dilemmas. But it is also useful before being written: the project brings together all family members whether or not they work in the business. It’s an opportunity to communicate with each other on a whole set of issues that matters to them. In one family we recently worked with, the constitution allowed the family to work on its history, vision and values, the rules for employment of family members, governance, liquidity plans – and it brought together family members who had not seen each other in years!

A family charter cannot miraculously solve all existing issues. Issues will only be solved thanks to discussions, sometimes difficult, that the family holds. Importantly, such discussions enhance a family’s communication skills and its ability, in future, to solve new conflicts. This is a winning situation: the principles laid down in the constitution, added to the increased ability of a family to communicate, will reinforce each other to address further potential conflicts.

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