Ideally a family-owned business has two areas of governance, one for the business and one for the family. For example, the family might have a family council and the business might have a holding company. The boundaries for these areas of governance need to be established and respected. If this is not the case, then the establishment of these governance structures and boundaries is the first step.
The governance of the business should involve appropriate decisions allocating resources based on profit. Selection of personnel should be based on merit (not relationship to the family) and the culture of the company. The strategic and operating plans for the business must deal with the culture of the business and the process of authority and delegation. As appropriately selected business professionals come into the business, the planning cycle (analysis, written plan including actions, implementation, and analysis) should continue and involve these new business professionals. Frequently the issues of control, delegation, and trust are at the forefront. The creation of a written plan containing wise decisions evolved from polling a group of diversely informed individuals (including those new business professionals) is the best way to deal with these issues. This is the same general advice I would give to most businesses.
The governance of the family should involve appropriate decisions allocating resources to increase capabilities and opportunities allowing family members to pursue happiness in their lives. Family members are not selected but new family members recharge family energies and efforts. Proper attention to family issues will increase the wealth of the family by increasing the human and intellectual capital of its members. The nature of this governance has been written about by James E. Hughes (www.jamesehughes.com) in Family Wealth and Family – The Compact Among Generations. I recommend both books.
As with any business and any family, the principal issue and challenge is to maintain communication through conflict, error, success, failure, and passion. Often it is the ability to communicate that can save us from our greatest misapprehensions – the conclusions we come to about the motives of others.
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