In our last Family Legacy Planning email, we introduced the topic of a Family Governance System. In learning from the best practices of successful multigenerational families, we found they adopt and follow a governance structure to help them navigate the uncharted waters of family life. In order to look like the family they want to be 25 years from now, families need a procedure for making group decisions, resolving conflicts, onboarding in-laws and younger generation members, and charting out a path to achieve the family’s long-term vision. They don’t leave things to chance. That’s the WHY of creating a Family Governance System. Now let’s address the HOW.
We are all familiar with the governance structure of a business. Let’s look to that example for guidance. There are shareholders, who elect directors to set policy and strategy, who elect officers to run the day-to-day. There are board committees for special purposes. There is a set of governing documents including a charter and bylaws. Board meetings happen on an established frequency with prescribed rules for voting. All of these add up to helping strengthen a company’s core and weather through the ups and downs. The governance system makes for a strong business. Likewise, for a family to endure, it needs a governance structure comparable to that of a family business.
Ironically, it’s obvious to business owners that a company needs such a structure. However, it isn’t as obvious to most business owners that their families need one too. Many business owners feel that a strong business will keep the family tied together and unified. In actuality, it’s the other way around. As noted family consultant and my good friend Tom Rogerson of GenLeg Co. says, “A strong business cannot hold a family together, but a strong family can hold a business together!”
Rogerson uses the analogy of a railroad track to illustrate the multiple goals of family governance. The right rail represents the financial goals of a multigenerational family. The left rail represents the family’s relationship and culture goals. The crossties unite the two rails together where the family learns communication skills and builds trust in family decision making. Strong crossties are the ties that bind a family together through thick and thin. By having a structure and engaging in learning exercises, the family becomes more connected. It develops a healthy interdependence, so the support system is in place to be there for each other.
In future emails, we will continue exploring HOW to create this structure, but we’ll close with one cardinal rule. A successful governance structure is not established by some higher power and imposed on a family. Instead, to achieve “buy-in,” each family member needs to participate in the process and own it. To build an empowered family, each participant needs to feel some responsibility and authority over its governance system. As Tom Rogerson so eloquently sums it up, “Wealth without responsibility or authority is a formula for resentment and failed self-worth.” Involving the family in the activity of building and maintaining healthy family governance is one of the keys to raising responsible heirs.
Marvin E. Blum
Marvin Blum (right) speaking with Tom Rogerson at a Family Governance Conference in Las Vegas.