Family Constitutions / Family Agreements

Family Constitutions, also called “Family Agreements”, are formal documents, developed collaboratively by family members to encapsulate the values, beliefs and objectives of the family, as a family, with specific reference to the family’s relationship to and dealings with its family business.

The Constitution also supports the work of the Family Council.  Realistically, neither can be implemented effectively without the other.

Family Constitutions should not be used as a primary response for resolving conflicts in family businesses.  Just as a contract records an eventual agreement between parties, so a Family Constitution should be the outcome of actual agreement, it should not try to be the cause or machinery of that agreement.

Nevertheless, having the family work collaboratively to develop, agree and record their common goals can have a powerful healing effect on a family that is suffering from stress or conflict.  It can also help families struggling with change, or too many/too few options, to gain focus and develop consensus.

Developing a Family Constitution

Developing a Constitution is an exercise in deep reflection on the very essence of the family, on the complex relationships within it and on the relationship of the family to its business, both now and in the future.

Constitutions are usually developed at fully facilitated retreats lasting between one and four days.  Going “off-site” is both a practical measure to get away from the distractions of the business and a symbolic move intended to emphasise the separation of family and business.

A successful program enhances self-awareness and sense of position in the family and the business.  At the same time, it forges and strengthens the bonds that hold the family together – the bonds and commitments that can make it such a formidable force in business.

The Family Constitution Process

The process is conducted in four main stages:

1. Stage 1: Preparation / Factfinding.  The process begins with a series of interviews with family members (individually or, more usually, with spouses and partners).  These meetings are designed to achieve three things: (a) ensure that the chemistry is right between family members and our facilitator;  (b) to gather comprehensive background information about the individuals, the family and the business;   (c) to understand the family dynamics well enough to be able to develop a process that has strong prospects of success.
   
   Note that if substantial conflict or dysfunction are detected, we will try to get the problem resolved through a mediation process, at least to a degree that lets us believe we can proceed with reasonable prospects for success.
2. Stage 2: Preparation / Pre-Thinking.  We provide the family with suggested headings for their Constitution and with notes directing their thinking towards possible content under each heading (see below).
3. Stage 3: Develop the Constitution – This is facilitated at a retreat through a brainstorming process that is used to develop content.  Depending on the size of the family, the complexity of the family business and the type of Constitution they require, the process usually takes 1 to 2 days to completion of the initial draft.
   
   The content of a typical Constitution is as follows:
   
   The Family Constitution
1. Background to the Family Business
2. Our Core Principles
3. Definition of Family Members
4. Family Objectives
5. Family Values
6. Achieving a Balance between the Family and the Business
7. Non-Family Directors, Managers and Workers in the Business
8. Code of Conduct - Expected Behaviours
9. Family Council
10. Family Forum
11. Entering the Family Business
12. Succession Issues
13. Preventing and Resolving Conflicts
14. Confidentiality
15. Covenant to not Compete
16. Updates and Amendments to this Constitution
4. Stage 4: Finalise the Constitution. The family is provided with an electronic copy of their draft Constitution and a timetable is set for its refinement and finalisation by the family.   One family member usually accepts responsibility for finalising the document, assisted by other family members, as required.  We remain on call to help, but hope to avoid being heavily involved in this stage of the process as it is better for the final document to be produced by the family itself.

Benefits of Family Constitutions

Constitutions “lock in” family commitment to the future and support the ongoing work of Family Councils.

By defining and prescribing the relationship of the family to the business in a Constitution, an objective, agreed set of rules is established that will always be available as a frame of reference to help prevent or resolve future family : business problems.