We are pleased to introduce a new feature to our Family Business News. Susan Lesser, an experienced business consultant and advisor to family businesses, will be answering questions pertaining to your family business in her Family Matters column. In this first column, Susan answers questions about family councils.
1. One of our business advisors has suggested that we start a family council? Can you tell me a bit more about exactly what a family council is?
A family council, also referred to a family supervisory board, inner council, or family executive committee is a group comprised of the family members in a business (or sometimes just a subset of family members) with the goal of addressing those issues that overlap the family and the business, such as: the employment of family members, business ownership by family members, voting rights, valuation of shares, and family values/philanthropy.
There can be various "flavors" of a family council depending upon the size of the organization, the size of the company, and the degree to which the family works in the daily operations of the business. That being said, the starting point for the creation of all family councils is as simple as deciding who will participate"_
- All family members who are active in the business?
- Only those family members who are active in the business and who hold a leadership role?
- All family members active in the business and their immediate families?
"_and establishing a scope for the council activities:
- How involved in company management will the council be?
- Will the council include a philanthropic component?
Finally, nothing can go forward until a full set of by-laws are authored and adopted.
2. Our family is not as cohesive as it used to be when my father was with us. The drama is exhausting and starting to hurt our company. We are hoping that if we establish a family council, our personal problems will go away and we can just focus on our business. Is this possible?
Problematic family dynamics are common in family councils. Keeping negative behavior patterns in check is critical for a family council to achieve its goal of business growth through family unity and continual, open communication. Family council members must learn how to work together effectively and decrease the chances for disruptive conflict.
This can be achieved through implementation of formal decision-making processes and family accountability rules, often with professional assistance. One of the most effective tools available to families is the creation of strong by-laws. Through this comprehensive document, the procedures for such potentially thorny issues as breaking a stalemate, the establishment of roles and responsibilities (family member vs. operational position), and buy-sell requirements are settled.
Overcoming negative family dynamics requires effort and commitment on the part of all concerned. The foundation for this dedication is trust developed over time and participation in collective experiences. With thought, planning, and effort, tools can be put in place at every stage of a council's development to fortify this method of governance against problematic behavior patterns: moving it ever closer to success.
3. My family has decided to start a family council before the end of this year. Our interpersonal relationships can sometimes be rocky. What should we expect?
Most councils' effectiveness are less about the council and more about the family, that is, family dynamics. In its most basic form, a family council is simply a multifunctional team. And like any team, it follows the predictable developmental stages of forming, storming, norming, and performing.
During the forming stage, the family council begins meeting, discovering, and refining the reason for its existence; working to articulate its goals; and exploring opportunities and challenges. This is the straightforward part of family council work. Nothing impactful is being decided, so threatening feelings are minimal and therefore easy to control.
During this stage, family dynamics are at their most varied. In more closely knit families, this step is relatively calm and uncomplicated. In less cohesive families, this step will feel a little awkward. Observable behaviors may range from family members engaging only in small talk and safe conversation punctuated by uncomfortable laughter to the formation of cliques clustered along the walls with a few brave souls (generally those who initiated the family council) mingling in the middle of the room.
In a family council, storming is the most pivotal stage, because if it is not negotiated properly, the family could remain here permanently. This stage is termed storming because of the stormy behaviors exhibited when team members seek to align their individual perspectives with one common end, augmented by the growing realization that the task at hand might be more difficult and complicated than initially anticipated. At this time, family members are determining which issues they will tackle as a council:
- What will council leadership look like?
- How will the council leadership pass between members?
- What will be handled individually and reported back to the group?
- What will be managed exclusively through a group process?
The consequences of decisions made during the storming phase are critical to the future actions of the family council.
Family dynamics change in this stage of development. The stakes now are considerably higher, so council members can no longer afford to hold their tongues. Meetings often become contentious or even hurtful. Sucker punches are thrown. Offline meetings occur, and triangulation: the inclusion of a third person in a conflict between two others: runs rampant. One contentious issue that might arise during storming is employment eligibility requirements for family members who wish to enter the business.
The destructive nature of storming, when left unchecked, is legendary, which is why professional direction is often helpful during this phase
Effective storming involves setting and respecting rules: rules for coming up with ideas, rules for sharing ideas, and rules for respecting ideas. To ensure a positive outcome, council members must learn how to have a productive conflict. In a productive conflict, all parties are active stakeholders who work to resolve their issues in a way that results in a win-win: or at least a tolerable-tolerable: situation. Techniques for having difficult conversations, such as active listening, must become routine.
During norming, the family council begins to resemble a well-oiled machine rather than a broken-down, sputtering engine connected with frayed wires. Consensus is reached on council rules, behaviors, communication methods, and taboos.
All sticky matters have been resolved during the storming phase, which in turn allows trust to develop. Trust is earned through experiences that were shared during the forming and storming stages. The creation of trust is essential for a family council to progress to the performing stage.
During norming, family members begin to feel a sense of accomplishment. If they don't see light at the end of the tunnel, they all at least agree that they see the same tunnel. The key to controlling negative family dynamics during this phase is to build on the trust that has been created by having council members actively identify group activities, consensus items, or joint statements that developed specifically because trust now exists within the group. If a council seeks to phase out a professional facilitator, this could be the final role for that person.
Worth noting is the potential onset of groupthink during the norming stage. Groupthink occurs when everything is proceeding so smoothly that no family member wishes to upset the rhythm and revert to the tumultuous days of the storming phase. Getting along becomes valued more than getting it done and, consequently, an unhealthy apathy may slow the council's progress to a virtual standstill.
At this point, the family council has achieved success. By highlighting individual strengths and compensating for individual weaknesses, the team is able to function as a unit. All members agree that the whole has become greater than the sum of its parts. Dissent is encouraged. Conflict is productive.
A family council that reaches the performing phase is fully integrated. Members are accepted both because of and despite who they are.
By the time the performing stage is reached, the family council's objectives are clear, processes are functioning, and results are achieved.
Going forward, the greatest challenge from a family dynamics perspective is dealing with change: a family member leaves suddenly or a new family member is brought in. Consequently, the council must establish definitive processes for integrating and orienting new members. Additionally, cross-functional training must take place regularly so that no voids are created with members' departures.
4. Should every family business have a family council? Knowing how we all behave when my family is together, I am nervous that getting us all together may be a disaster.
Time and experience have proven that family councils ultimately strengthen a family business. However, when people and personalities are involved, nothing is certain and the same things don't necessarily work for everyone. On occasion, a family council is probably not in the best interest of a family. Bringing together the hurt son, the overbearing father, the conciliatory mother, the alienated daughter-in-law, and so on, is a dance of daring and finesse. Because of family history and individual personalities, these people have very different agendas, and reconciling such disparate views is sometimes impossible.
In these cases, negative family dynamics run so deep that, despite their destructive nature, they are as essential to the family functioning as water is to a plant. The house of cards built around these behavior patterns is so delicate that it cannot withstand the scrutiny that inevitably comes with the formation of a family council: yet. It is sometimes advisable for specific people: those critical to the group's success who nonetheless have the greatest potential to derail the process: to enter into individual therapy prior to the creation of the council.
Alternatively, groups may opt to begin their interactions by holding several nonthreatening family meetings with a social emphasis. These events start building trust and confidence in the process.
If you have any questions about issues related to your family business, I will be pleased to address them here. Names of people or companies will not be included, as anonymity is critical in a column such as this. All submissions may be forwarded to me at email@example.com or firstname.lastname@example.org.
Susan Lesser is cofounder of nPlusOne, an operational management company that focuses on the areas of recruitment, training, and consulting. Susan uses her business acumen and counseling background to provide a distinctive level of guidance to her clients: one that improves their financial results by focusing on employees and the processes that align them to the company strategy. With 25-plus years in education and approximately 15 years as a consultant, Susan's accomplishments include: serving as the first female consultant at the UConn Family Business Center; publication in such magazines as MetalForming, Consulting, TD, Family Business, Hartford Business Journal, and TLNT.com; and presentations for organizations including: CBIA, CONNStep, the Small Manufacturer's Association, the National Tooling & Machining Association, ESOP Association, the National Association of Employee Ownership, SHRM, and the IMA: the association for accountants and financial professionals working in business.