The Dilemma of the Mature Family Council
by Kelin E. Gersick, Ph.D
At the first meeting of the year, the seven members of the Franco Family Council looked expectantly at each other and waited for inspiration. The Council was formed six years earlier at the conclusion of an exciting family retreat. At the time there was a high level of anxiety in the family about the future of the business. The senior generation was talking about retirement and no one knew what was planned concerning succession. Communication was infrequent between the relatives who were executives in the company and the rest of the nearly 100 family shareholders.
In the six years since the retreat, the accomplishments of the Council far exceeded everyone’s expectations. Communication was much improved among family branches and between the shareholders and the business executives. With the Council’s encouragement, the succession choices and timetables were shared with the whole family. The Council sponsored courses on financial literacy and estate planning. They organized an annual “Youth Day” where the youngest members of the family spent a few hours learning about the business and touring a facility, and then enjoyed an afternoon at a barbecue at their great uncle’s beach house. Over the first year the Council hammered out a policy on entry criteria for the employment of family members in any of their multiple businesses. In the third and fourth year they concentrated on professionalizing the family foundation and developing a procedure for family involvement on the foundation board. Probably the finest hour for the Council was stimulated by a business crisis two years earlier, when the company was involved in a major merger and restructuring. The Council became the coordinator of information to the shareholders, helping the business leaders to keep the family informed and channeling questions back from the shareholders. The final meeting of the Council at the end of its fifth year was marked by satisfaction and pride at all they had accomplished for the family and the business.
But now, Gloria Franco, one of the veterans who had been a member from the start, broke the silence with the question on everyone’s mind: “What do we do now?”
That’s an important question to ask. Over the past three decades, many business families have taken the advice of their consultants and friends and formed a Council as a forum for family discussion. Some of these Councils began with an urgent platform ready-made. They responded to pent-up frustration over shareholder input, or spotty communication. Perhaps there was a crisis of succession or liquidity that needed immediate attention. An advisor may have suggested a checklist of pressing issues that helped sell the concept of the Council in the first place: policies on family employment, shareholder agreements, creation of a family office, newsletters, or next-generation engagement. During their first 1-3 years, most successful Councils work like task forces, moving through a set of reasonably clear challenges and previously undiscussed topics.
But what happens when the policies have been written, the family events have become routine, the newsletter is in operation, the succession decisions have been made and the transition is well along or completed? What is the “maintenance function” of the Family Council? Is it compelling enough to justify the effort and cost required, and to command the commitment and attendance of members? Governance is more than “just showing up.” The tasks take work, and family governors often get fatigued. Sooner or later attendance begins to fall off. Leaders get frustrated. The meetings begin to drag, or are marked with forced enthusiasm. Finally one member asks the question that Gloria Franco raised: “Why are we here?”
At that point, the Councils that succeed change Gloria’s question to, “What is our work?” They remember that the impetus for beginning was the realization that the family had important work to do that should not be left to informal Sunday afternoon discussions in the grandparents’ back yard or a quick meeting after Thanksgiving dinner. Now they need to hold themselves to the same standard of “value added” that they enforce for their board and their executives. They accept that the efficiency and cost effectiveness of the Council should be periodically assessed. In short, the mature Council needs to reinvent itself, choosing new tasks based on a thoughtful analysis of real need, and then planning efforts that accomplish them with quality and efficiency.
What new tasks? If a Council stops to reflect on its purpose, is usually begins with a discussion of the benefits they believe the family has received so far from the existence of the Council. That typically includes:
- Facilitation: managing the conversations among family members
- The Council has rules for interaction that make everyone feel safe. In many families there is a concern that the quality of discussion in the family will decline without a sanctuary from conflict and anger.
- Prevention: providing a safety valve where issues can be raised before they boil over
- Who knows when a new hot topic will emerge? A Council gives the family a chance to anticipate the evolution of the family over time – aging, marriage, births, deaths, geographic moves and economic advancement and reversal – and work on future issues when they are still solvable.
- Acculturation: a setting where senior family members can demonstrate the family culture and values to younger generations
- The Council may be one of the only intergenerational events in the family. It becomes the definer, and preserver, of the ongoing family legacy and unique identity.
These benefits are a boon to most families, but they are not the same thing as a specific agenda for Council continuity. The answer of what work to consider lies in the traditional 3-circle model of family business: an interlocking set of issues arising from three subgroups, the business, the owners, and the family. This is where a 3-circle reflection by Council members about their unique family identity can guide agenda-setting. Some families see themselves primarily as shareholders. They use the Council to address the core dilemmas inherent in that role: dividends, shareholder value, classes of stock, board representation, liquidity, and estate planning. In the extreme, the family chooses to blur the distinction between a Family Council and an Owners Council, and it becomes a forum that guides the positions taken by family directors and trustees, and sometimes oversees the selection of those directors on behalf of the entire family. Other Councils focus more on business operations, especially if the family is still in the owner-manager phase: succession planning, career development of family members in the company, entry criteria for employment, the company’s community relations and public image. For them the ongoing tasks of the Council are to support and inform the family members who are working in the company. A third group of Family Councils never touch any of those topics. They concentrate on family issues: the family office, education for all generations, managing commonly held or “legacy” assets such as a country home or farm, planning events for recreation or building relationships among cousins, coordinating assistance to family members in crisis or with chronic health needs, and philanthropy. Finally, some Family Councils define themselves to be in the “overlap” sectors of the three circles, and divide their time among issues from two or all three or the family enterprise realms.
Which tasks to choose now? Whichever of these three or four self-definitions has guided the first years of the Council, the best process for re-invention, and re-commitment, is to ask your constituents what they want. The important lesson is that this reflection and re-focusing is in itself an extremely valuable contribution by the Family Council. It should be given the time and space to be done carefully and patiently. Family Councils do not need to scramble to pick a new set of deliverables in order to justify their costs to the extended family, or to entice new members. Instead they can explicitly define their purpose at this moment as reflection and stock-taking. They become both learners and educators for the family, modeling a culture of focusing on evolving a family legacy across generations, and facilitating a family dialogue about the reasons to stay together, not limited to business performance and generating wealth. They may engage in surveys or an “interview tree” of structured conversations about individual goals and their relationship to common themes. They may concentrate on building communication bridges between family branches. They may refocus family assemblies and gatherings beyond show-and-tell about the current operating companies or wealth management, toward questions of long-term purpose and family mission and identity. Whatever technology or formats they choose, the key is an unapologetic commitment to truly getting to know family members better, and to facilitating their connections with each other. If the Council can use this transition moment to better understand family members’ personal “dreams,” and then help weave those priorities into a shared Dream, they may find a clear mandate for their own agenda, and an answer to their dilemma of “What do we do now?”