Observations
Many people in family business understand they’re running a family business, but they don’t always acknowledge the other reality sitting behind it: they’re also running a business family — or at least being supported by one — especially in multi-generational enterprises.
Over time, every successful multi-generational family business evolves into a business family, having learnt (sometimes the hard way, sometimes by planning ahead) that the family must behave like a high-performing organisation. That means professionalising family decision-making, communications, next generation development, problem-solving, conflict resolution, stewardship of shared assets, and continuity planning.
This puts more pressure on business families than on ordinary families, because they are trying to succeed as both an emotional system and an economic system — at the same time.
A key distinction matters here:
- Family business governance focuses on operating the business.
- Business family governance focuses on operating the family (as an organisation) in a way that supports continuity, healthy relationships, and responsible stewardship.
They must be separate — and able to speak to each other — because the family and the business run on different rules.
What “governance” actually means
Governance is a term that gets thrown around and misunderstood. At its core, governance is:
The structures and systems used to manage an organisation to achieve goals and comply with relevant obligations.
Boards, family councils, trustees, and professional leaders all carry moral (and often legal) obligations to govern well.
Most business families — and many family businesses — don’t fail primarily because of a bad balance sheet. Some do, but most collapse for other reasons: weak planning, unmanaged egos, poor decision-making, inadequate succession processes, broken trust, and the slow erosion of relationships.
Good governance in a family is not bureaucracy, punishment, or a mountain of rules. It is scaffolding — built to deliver:
- Clarity about where things are going
- Certainty about what has been agreed
- Commitment to execute what matters
Think of governance as a way for families to grow without falling off the rails, and without needing emergency resuscitation later.
Case Study: Ringer Manufacturing
Ringer was a third-generation manufacturing business in Adelaide. Grandpa started it more than 70 years ago, making basic metal products. Dad expanded it for decades, but in the last 10 years cheap imports crushed the market and the business almost failed.
Dad begged his only son (there were three daughters) to return from a well-paid engineering role and save the business. Dad promised:
“If you turn it around, and fund my retirement through super, the business is yours.”
The son returned and became CEO. Dad stayed on as non-executive chair. The family had no formal governance — no family council, no documented agreements, no structured decision-making — just informal family harmony built around barbecues and holidays.
Ten years later the business had been transformed: upgraded machinery, modern systems, CAD design, titanium components, mining-sector contracts. It was profitable.
Dad had extracted major profits for retirement while seriously underpaying the son. Then Dad had a minor stroke and decided succession needed to happen. Suddenly the three daughters — who had never shown interest or involvement — demanded 25% each.
There had never been open family discussion acknowledging the son’s sacrifice, rescue effort, or sweat equity. Everyone believed Dad had “given him a job,” and he should be grateful.
The result: conflict, collapse, broken relationships, destroyed value, unpaid debts, called-in guarantees, geographic family fracture, and estranged grandchildren.
That is what weak family governance looks like when reality finally arrives.
Why family governance matters
1) Families are emotional systems; businesses are commercial systems
Families prioritise love, belonging, and identity. Businesses prioritise performance, accountability, and results.
When these two systems collide, friction is inevitable. The question is whether the family harnesses emotional commitment as a strength — or allows it to pull the business and the family down.
2) Complexity increases with every generation
Founder → Sibling generation → Cousin generation → shareholder-like structure.
What works when one founder calls every shot breaks down when there are multiple voices, multiple households, multiple spouses, and multiple interpretations of “what was promised.”
Governance must evolve from implicit rules (“we’ll work it out”) to explicit agreements (codified rules and delegated authority).
3) The biggest fights aren’t really about money
Money is often symbolic of deeper drivers:
- Recognition: “Do you see what I’ve sacrificed?”
- Fairness: “Am I valued the same as others?”
- Control: “Who decides, and when does that change?”
- Legacy: “What are we trying to preserve — and why?”
- Succession: “What happens when the old leader can’t lead?”
Ignoring these drivers and focusing only on legal and financial mechanics usually misses the actual problem.
4) Professional advisers often underestimate the family factor
Legal and accounting logic assumes rational compliance: “If the documents are right, people will follow them.”
Family systems don’t work that way. Agreements fail when identity, pride, shame, status, and cultural expectations override rationality.
A governance system prevents these surprises by preparing the family progressively over time — not in the middle of crisis.
5) Perfect is the enemy of effective
Over-engineered governance fails because families ignore it. Governance must be fit-for-purpose: practical, usable, culturally aligned, and realistic.
Family governance systems should feel more like a well-designed home than a cathedral: functional, welcoming, and capable of handling untidy moments.
The Seven Elements of Organisational Success
A useful way to structure governance is through:
The 3 C’s
Clarity
A shared vision of where the family is heading and why.
Certainty
Turning vague hopes into shared agreements: “We all know.”
Commitment
People who matter sign up to contribute — and are held to it.
The 4 S’s
Strategy
A long-term family blueprint (often 25–100 years if legacy matters).
Structure
Bodies that do the work: Family Council, Family Forum, and (when needed) a family office.
Systems
Policies and processes: education, communication, decision-making, conflict management, succession, wealth stewardship, and legacy preservation.
Often documented through a Family Constitution, supported by policies and charters.
Skills
The human capability to execute: leadership, emotional regulation, communication, negotiation, meeting discipline, accountability, and follow-through.
Families often fail not because they lack ideas, but because they lack the skills and discipline to implement them.
Strategies and solutions
1) Treat the family as a strategic asset
A business family is not a social club. It requires professionalism — not corporate coldness, but disciplined maturity.
2) Build governance using the 7 elements
Start with Clarity, Certainty, Commitment — then formalise Strategy, Structure, Systems, and Skills.
3) Build the culture deliberately
Culture is the invisible engine behind governance. Build a culture that is transparent, nurturing, collaborative, and performance-aware.
4) Embed succession as a normal lifecycle process
Succession shouldn’t be a crisis response. It should be scheduled renewal — planned, monitored, and executed over years.
5) Start with conversations, not documents
A constitution is not a magic cure. It should be drafted only after the family has already worked through the hard issues and reached real agreements.
Start with values, vision, boundaries, expectations, and known blockers. Then build policies and plans that reflect what has been agreed.
6) Build governance progressively in layers
Don’t try to deliver a complete governance architecture overnight. Start with focused policies (employment, dividends, entry/exit rules, conflict management) and grow them into a full constitution over time.
Progressive engagement builds buy-in, capability, and trust — especially when next generation members are included early and meaningfully.
Summary
Family governance is the difference between families who survive generational change and families who fracture when it arrives.
It professionalises decision-making without dehumanising the family. It creates clarity without control games. It replaces assumptions with agreements. It protects relationships while protecting the business.
Most importantly, it prevents families from trying to invent governance in the middle of a succession crisis — when emotions are highest, time is shortest, and damage is easiest.
Taken from the up coming book:
Making Sense of “Family Business”
(60 Common Causes of Family Business Conflict, and how to deal with them)
