Family Business Governance

The most successful family businesses operate with strict internal policies and a clearly defined structure. One of the best mechanisms for ensuring that a family business runs like a corporation is the establishment and implementation of an internal Family Business Governance structure. This structure eliminates the danger of allowing family elders to control aspects of the business that are outside the realm of their responsibility.

Implementation of an internal governance structure allows a family business to operate like competing businesses that are not family-run. Effective Family Business Governance ensures internal discipline and establishes professional boundaries that would not otherwise be possible.

“Governance establishes the rules of engagement and how the game will be played. It also defines boundaries. One family called it “The Family Deal.” What is the deal in your family?”

David Bork
The Little Red Book of Family Business: Page 57
Following are the roles that should be incorporated into a Family Business Governance Document:
  • Advisory Board: An Advisory Board is an excellent tool for ensuring that ideas are evaluated by professionals who are able to think outside of the box. In most circumstances, the Advisory Board should consist of outsiders or people who are not affiliated with the family. Outsiders have the unique ability to review ideas, provide suggestions, and offer direction that may not be obvious to family members who are actually working within the business.
  • Board of Directors – The Board of Directors approves the ideas and strategies of the family business leaders. The Board should consist of individuals with adequate knowledge of company operations as well as the ability to make informed and intelligent choices for the betterment of the company as a whole.
  • Chairman of the Board – In most family businesses, the Chairman of the Board is both a family member and a shareholder who has a sincere interest in the success of the family business.
  • President or Chief Executive Officer – The title of President, or Chief Executive Officer (CEO), is prestigious and important. In conjunction with the rest of the company leaders, the President or CEO is responsible for the success of the business. This success is defined by having a business that meets corporate goals, performs to expectations and shows adequate return on investment.
  • Chief Financial Officer – The Chief Financial Officer (CFO) oversees and manages the financial aspects of the family business. This role requires extensive financial expertise and background that includes accounting skills.
  • The Family Business Council – It is a good idea for family businesses to hold regular meetings in which family members are informed about the current status of the business and any future business plans. The purpose of the Family Business Council is to make sure the family is fully informed about Cambridge Consulting Services.

If you want your family business to function efficiently and to enjoy as just as much success as a business not run by members of the same family, it is essential to have a Family Business Governance document. This structure establishes rules and mechanisms for resolving disputes. Family Business Governance also creates an environment with established roles, which will provide peace of mind for all involved family members.

Cambridge Consulting Services has extensive experience assisting family businesses in the development of Family Business Governance strategies. With many decades of experience, we understand the wide variety of challenges that families face as they work together to build, grow and sustain a thriving family business generation after generation. Through conferences, continuing education programs, family business retreats, speaking engagements and private family business consulting services, Cambridge Consulting Services has assisted more than 230 family-owned businesses around the world chart their way through family business issues of all shapes and sizes.