If communication is the first part of succession planning, then governance is the second.
A sound governance structure can support your business exit strategy or transition to retirement by setting out how decisions will be made. It can also encourage transparency, stability and family unity, and help preserve the family heritage over the long term.
A family agreement, also known as a constitution or charter, can take the vision, values and objectives of the family into account. It establishes rules for succession planning, communication and conflict resolution. It also clarifies the roles that various family members are expected to play and could also include your intentions for the future. For example, that you would like the family business to remain within the family for the benefit of multiple generations.
Most governance structures are implemented through a structural governing body. This could take the form of regular meetings attended by all members of the family. It could also be a representative family council – a decision-making committee of three and five members.
Some family businesses create a board of directors, and while it’s common for all of the directors to be family members, one or two trusted ‘outsiders’ such as an accountant or solicitor can help provide an impartial view. Others appoint an advisory board of independent experts who can expand their networks and provide ongoing professional advice. A board with independent directors can also exist in parallel with a family agreement, to help keep family and business matters completely separate.