Family Business UK recently published an updated guide to Family Councils, written by Peter Leach, Principal Consultant at Sylvan Family Business Advisers. Martin Greig spoke to Peter Leach about how to build a successful Family Council.
As family businesses grow and mature, having an effective platform for governance is crucial to ensure open and constructive communication, and provide a platform for resolving conflict and educating family members on roles and responsibilities.
“The Family Council plays a very important role in the governance structure of the business,” says Peter Leach, the man widely regarded as the founding father of family business thinking in the UK. “But it’s not right for everyone.
“For some, the name Family Council is a little grandiose, they don’t like it. I have one client who calls it the Family Dog Walk. But, what is important,” says Peter, “is for all family businesses to have the appropriate forum to sit and talk about what’s important.”
Culture Eats Everything
Years ago, academics and family business advisers looked at the issue differently. They thought that if you had a Board and Family Council that would fix all the problems. They were “structuralists”, believing that putting all the right governance structures in place was the answer. What they didn’t account for was culture.
“To run a successful family business, you need the right culture,”
says Peter. “We used to think that if you have a Board, a Family Council, Trustees, shareholder agreements, all that stuff, everything would work. But it only works if the culture is right for it.
“In theory it’s brilliant, but it’s a bit like having a successful operation and thepatient dies. That’s because culture eats everything, culture eats structure” – thinking that Peter Leach attributes to the American academic Peter Drucker and Canadian family business consultant Matt Wesley.
Head or Heart
Culture in a family business is made up of two elements – affinity, which is the family’s heart, and alignment, which is the family’s head; and, depending on the family and circumstances, both are needed indifferent measures to be successful.
“If families have lots of affinity and low alignment, they are disjointed everybody’s happy until there’s a crisis,” says Peter, “but, with strong alignment and low affinity, families become transactional.
“The Family Council is predominantly there to balance the alignment and the affinity in order to have a sufficiently strong culture. Without a good measure of both, any kind of governance structure, especially a Family Council, won’t work.”
Never Ending Process
Setting up a Family Council requires careful thought and consideration and, once up and running, its task is never complete. It is “always a work in progress,” says Peter.
Adaptability and flexibility are the watchwords in a structure for which there are no templates. Even more importantly, family members must be comfortable with the structures and processes created.
“Ultimately,” says Peter “the Family Council must ensure there is enough affinity (heart) for the family to survive the highs, lows and disasters that will inevitably happen.”
The Family Council guide is free to download from the Member Resources centre on our website.