Often a family business starts with Mum and Dad and family governance isn’t an issue as both parents want the best for their children, and their values and vision for the future are aligned.
However, the key to a good family governance business structure is implementation – we recommend formalising your governance framework before issues arise in the family business.
Family business governance becomes critical when there are multiple generations working together as this can result in competing interests between siblings and parents. The further the business progresses along the family tree, the more important an independent facilitator becomes to ensure your family vision and values are aligned through governance structures. They can also help the next generation and future generations receive the financial acumen training required to continue to build wealth within the family business.
The Family Business Survey results
Grant Thornton’s recently released 2023 Family Business Survey data identified the reasons why family businesses believe governance is a priority:
- 36 per cent due to not having a family charter in place;
- 25 per cent due to family cohesion issues;
- 24 per cent due to planning to commence Family Council meetings.
Our Survey results also showcased who thinks family governance is important:
- 53 per cent of the third generation claim family governance is very to extremely important;
- 64 per cent of businesses operating 51-70 years claim it is very to extremely important;
- In contrast, 92 per cent of businesses operating less than 5 years claim it’s not important; and
- 67 per cent of businesses with $50-100m annual revenue claim it is very to extremely important;
- In contrast, 63 per cent of businesses with less than $1m annual revenue claim it’s not important.
Why engage an external facilitator to help with family business governance?
The following explains how a family governance program would operate and how it might be appropriate for your situation.
- In our experience, many family business owners wish to achieve and articulate a common understanding among the family stakeholders around the vision of owning and operating in practice. This can include the management of the business and transition of ownership going forward. The program will assist with not only the business, but also the investments outside the business.
- An external facilitator’s role is to act objectively in order to assist a family business in reaching an agreement to create a workable framework for the future. For our role to be successful, we cannot become the agent of any one individual within the family business and must maintain a neutral position throughout. To achieve this, we would always see our client in these circumstances as the business entity, rather than one or more individual family members.
- Building a consensus where there are ‘Family’ and ‘Business’ issues to address is not an easy process and the whole exercise needs to be handled sensitively and methodically.
We’re here to help
At Grant Thornton, we’ve developed a tried and tested methodology, which we tailor to fit the circumstances of your family.
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Should you wish to discuss your family business governance structure, or if you have two or more generations working in the business, please reach out to one of our family business consultants to hear how our family governance structure and processes can assist your family.
Learn more about how our Family business consulting services can help you
