AS FAMILY members and signatories, are you faithfully complying with what you agreed and wrote in the family constitution? Are all signatories walking their talk? In short, are your actions consistent with what you all concurred during your constitution crafting sessions?
Founders and business leaders must realize that it is the process that really matters. And it is often said that when making a constitution, the process is more important than the output.
Why? The process gives family members the chance to work and make decisions together, deliberate in a structured logical way about the future of the family and the business, and prepare for the transition long before the founder or the key business leader retires or becomes incapacitated.
The essence is to create a certain level of shared understanding among family members, create a set of family norms of behavior, clarify roles, define rules, understand every family member’s/shareholder’s rights and responsibilities (active and passive), and institutionalize accountability.
In a Harvard Business Review article entitled “The Three Components of Family Governance” penned by noted family business expert Dr. John Davies, he adeptly recommends the activation of the following critical components in the governance ecosystem immediately right after the signing of the family constitution:
· Family must initiate periodic (annual) assemblies, and
· Activate the family council so issues that were not heard or given importance during the constitution building sessions can now be thoroughly discussed and planned.
Under a post-constitution stage, the primary objective is to sustain the energy and the drive of the family by encouraging them to further strengthen business-family communication. Treating the family in a more formal, organizational way can feel awkward at first, and asserting the value (without exception) that each family member must embrace the concept of a fair process is a sensitive, crucial and very important governance phase.
Overcoming the initial discomfort and encouraging every family member to participate in decision-making is part of the journey of transformation. When they have a “voice,” and when they believe the process for making a decision is fair and transparent, they will accept the outcome of that process even if it may not reflect their own personal views. The fairness principle was already introduced when family members started working together on the family constitution. That is why this frame of mind should be carried over to the family council and assembly.
Critically and through the activation of the family council, facilitators and the framers of the constitution must thoroughly spend time embracing the values and the vision as articulated by the founder’s original motives for building the family business. It is important that family members first clarify the shared beliefs, experiences and legacies that unite them in their choice of stewardship over ownership of the enterprise. These values represent the kind of business culture in which the company operates and will define how the family will work to support the business’ future success.
When the shared vision is internalized, the journey towards growth can now move forward by way of family commitment and strategic thinking.
To conclude, a well-crafted family constitution (reinforced with a family council, assembly and shareholders’ agreement) that goes beyond two to three generations towards the future can perpetuate a family business for a long time. It is, therefore, my wish that family business members start the process now to ensure the legacy of the founders and the everlasting prosperity of the family and its businesses. Having a standalone constitution devoid of any collective effort is empty and a complete waste of time and resources.