Family Business Advisory Council: Purpose And Structure

by Nancy B. Upton, Ph.D.

A Working Paper for the Institute for Family Business, Baylor University, 1996

A family council is the organizational and strategic planning arm of a family, where all members meet to decide values, policy and direction for the future. It is the vehicle to address and explore family concerns that influence the business and the family. It also defines, clarifies and expresses the family's values, mission and legacy. One of the key functions of the council is communication and clarification of policies. It would be an ongoing process of listening to informal exchanges among all members as to what they believe in and want from the business. It would be the focal point for the future planning of the individuals, the family, the business, and how each would relate to the other. The family council should help a family to preserve the business so the present and future generations can enjoy the benefits of the hard work and sacrifices that progressed the business to its present state.

The Council should be a formal organization that has regular meetings, keep minutes and suggests policies to the Board of Directors. It should be open to all interested family members and spouses of all generations. The first several meetings should be used to generate an acceptable vision and mission statement along with a Family Creed. After this has been agreed upon by the majority, the next area would be to develop a Family Charter. The Charter would define the policies, expectations, rights, and responsibilities for members of the family. It would set guidelines in areas such as:

  1. Family's commitment to the business
  2. Reasons for that commitment
  3. Central family values: how it realizes its commitment
  4. Family priorities, resources and strengths
  5. Contributions of family members to business
  6. Contributions of business to family members
  7. Expectations and responsibilities of family members
  8. Ground rules for family participation in the business
  9. Distribution of profits and stock
  10. Guidelines for succession.

The Charter would make the agreements and decisions of the Family Council clear and explicit. All decisions should be recorded and made available to all members.

The Family Council should be more than just a business structure. The meetings should be fun and informative. There should be speakers to discuss items of interest. There should be time for sharing achievements, milestones, special events, etc. The younger generations should be encouraged to participate, as much of this will be for their benefit and future workings.

It would seem that an outside facilitator would be needed to get the Council organized - maybe for several meetings. After that, the organizing and conducting of meetings should rotate among family members. The various committees would report to the Council who would relay the consensus of opinions to the Board of Directors.

In summary, we feel that some form of active Family Council will be necessary for this business to survive in the future. We would propose that an additional organizational meeting be planned.