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Family Businesses Should Consider a Council



Question: I work with my family; how do we not bring the boardroom to the dining room table and vice versa?

Answer:

The need to differentiate between family and business is such a pertinent issue and how to keep the emotions that run rampant in a family business is a dilemma that faces all such businesses worldwide. The business needs to be run as a business, and the family needs to function as a family.

One of the solutions is to create the “family council.” It’s the organizational and the strategic planning arm of a family where all members meet to decide values, policy and direction for the future, says Denis Jaffe in his book, “Working With the Ones You Love.” At the Family Council, issues that deal with entry and exit strategies of family members into and out of the family business are addressed. For example, if you are a family member, that does not mean you have a right to go and work for the family business.

You have to earn that right by meeting certain criteria, such as having a university degree, or a thorough working knowledge of the position you are applying for, or wait until a position in your field becomes available before being employed by the family business.

Criteria for establishing development programs and mentorship programs for family members working in the business need to be created at the family council level and certain guidelines need to be adhered to. Another example of why it is important to have a family council is to decide whether to give annual dividends to owners of the family business or rather retain the dividends in order to grow the company. The chairman of the family council should not be the chairman or the president of the board, but rather someone who is not working in the business but has an integral knowledge of the business and is an owner.

Usually the spouse of the chairman of the board of directors or of the president would be a good choice. This person becomes the CEO , chief emotional officer , of the family council.


Written by Carmen Bianchi, director of the Entrepreneurial Management Center Forum for Closely Held and Family Businesses at San Diego State University.

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