Family Constitutions support the workings of Family Councils and regulate relationships and interactions between individuals, the family and the business. They capture and define the values, beliefs and objectives of the family, as a family, and contain rules for the conduct of family members in relation to their dealings with the Family Business.
A Family Constitution acts as an external, objective Code to which all family members can refer for guidance – to help prevent or resolve difficult situations. This makes the Family Constitution a valuable resource for dealing with day-to-day issues, and a critical aid when the family is faced with a crisis.
Although they’re rarely drafted in ways that make them legally binding, provided the family regularly uses and re-endorses its adherence to the Family Constitution, in the event of family dispute or conflict, it may provide some of the “best available evidence” of the family’s style and intent if the family finds itself embroiled in litigation.
Developing a Family Constitution requires deep reflection on the essence of the family and the complex relationships within it.
WARNING: We often have to rescue families that have plunged into the process of developing a Family Constitution expecting it to somehow, magically, fix their all-too-evident issues and tensions. It may have been their idea; usually they’re following advice from people or organisations that should have known better.
Trust me – it doesn’t work that way! Where serious issues and tensions exist they must first be identified, acknowledged, addressed and resolved, otherwise any work done on a Family Constitution will almost certainly exacerbate whatever problems, resentments or concerns are already there.
The real value in developing a Family Constitution is shared by the journey (the development and maintenance process), and the destination (the final document):
- The process bonds families together on a shared journey where they are encouraged, as individuals, to think about and work on things that are really important to them – in relation to themselves, their families and their family-in-business.
- The document provides continuing benefits to the individuals, to the family and to the business family, by developing and stating their own views and guidance on a broad range of issues – in anticipation of the inevitable challenges ahead.
Family Constitutions also provide a reason for regular reviews that help to keep everybody engaged in family issues.
Development Stages
The family needs to clear the decks of emotional baggage and tensions before working on its Family Constitution.
- Start the process by purposefully developing and agreeing the Big Picture Trinity with the whole family: Values, Visions and Goals (workshop). Don’t leave it to the Family Constitution process to develop these.
- Form a working party to develop a draft Family Constitution on behalf of the rest of the family. Set the development process up as a staged project.
- Capture and state the family’s: Values, Visions, Goals and Mission, in formal statements.
- Capture and state the family’s concepts of Legacy, Stewardship and Custodianship.
- Develop positions, guidance and rules on:
- Family First or Business First? Professionalism vs. Protectionism.
- Structures: Family and Business – Family Council; Family Office; Business Board; Advisory Board etc. Where does authority lie?
- What it means to be a family member: stewardship, mutual obligations, best practice and behavioural/performance expectations.
- Working in the business: eligibility, experience and competence requirements, performance and remuneration expectations, succession plans and job security.
- Benefits for family members in and out of the business.
- Roles and responsibilities of family and non-family employees, directors, advisory board members, coaches, mentors and trusted advisers.
- Other formal agreements required to help protect the family business: shareholder (buy/sell) agreements; pre and post nuptial agreements, and others.
- Plans and guidelines for the future, especially leadership, management and ownership succession and transition (family and business).
- Implementation and enforcement rules. The Constitution must be an effective living document. It’s been a complete waste of time if it isn’t used.
- Problem solving, conflict management and dispute resolution processes.
- Rules for reviewing and modifying the Constitution in the future.
- Circulate draft to rest of family for comment. Incorporate comments as appropriate. Ratify and adopt the Family Constitution at a Family Forum – gathering of the whole family.
Suggested Headings for a Family Constitution
- Background to the …………….. Family (brief history)
- Background to the …………….. Business (origins and brief history)
- Objectives of our Family Constitution
- Our Core Principles as a Business Family
- Our Family’s Values and Values Statement
- Our Family’s Objectives: Vision & Mission Statements
- Family Engagement
- Legacy and Stewardship
- Statement of Stewardship Principles
- Definition of Family Members
- Required Balance of Family vs. Business Interests
- Social Responsibility and Philanthropy
- Family Code of Conduct
- Our Business Philosophy
- Business Leadership Concepts & Principles
- Board of Directors: appointment, roles, responsibilities and authority. (includes executives and non-executives; family and non-family members)
- Advisory Board: purpose, membership, roles, responsibilities and authority.
- Growing our Business Interests
- Working in the Business: All Employees
- Working in the Business: Family Members
- Personal and Professional Development
- Professional Advisers
- Business and Personal Mentors and Coaches
- Family Leadership and Family Council Family Office
- Family Forum
- Transition and Succession Planning (generational transition)
- Communication and Problem Solving: Expectations and Processes
- Preventing, Managing & Resolving Conflict
- Covenant to not Damage or Compete
- Confidentiality
- Amendments to the Family Constitution
- Adoption of this Constitution
To develop or update your own Family Constitution please call, or contact: The Solutionist Group.