The family council, a means and not an end

Guest contributor: María Rodríguez García

Predoctoral Researcher and Lecturer · Universitat de València
Visiting Researcher · IESE Chair of Family-Owned Business

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The family council as a concept began gaining traction in the 1990s, when consultants and academics highlighted its relevance in terms of protecting the business family’s long-term interests and navigating potential family complexity.

Under these circumstances, the family council often served as a bridge between the family and business realms, especially as generational leadership changed hands and the connections among younger family members became more numerous and diverse.

Fast-forward to the 21^st century: are family businesses still being served by the family council? Today, the challenges faced by family-owned firms differ greatly from those confronted a few decades ago. Important economic, technological and social shifts have affected group dynamics, leading to a far more volatile, uncertain and ambiguous scenario.

So how can the family council help?

The role of the family council

The family council brings value to the business family by fulfilling the basic functions of a family—looking after, protecting and educating all of its members—but with an added feature: fostering entrepreneurship in future generations.

This is important since the family business undergoes a renewal with every incoming generation, which confronts the unique issues at play at that moment in time.

If the goal of family-controlled firms is to pass on the ownership, management and governance to future generations, specific mechanisms are needed to engage them and ensure they can successfully oversee family dynamics and separate them from corporate matters.

Protecting both the family and the firm

As mentioned in previous blog posts, the family council fosters the well-being of both the family and the company by establishing clearer boundaries between both spheres via (1) rigorous criteria and objectives, (2) fixed agenda in meetings, and (3) follow-up and preparation of future meetings.

When these points are met, the business family will benefit from a functional family council that is capable of:

• Building bridges of trust and understanding among family members by fostering dialogue and communication.
• Creating a training and mentoring plan for members of the next generation that values all professional profiles.
• Transcending individual interests, expectations and responsibilities to cultivate a shared family purpose throughout the organization.

In today’s VUCA environment, the family council can offer a framework to discuss and deliberate the best path forward for an asset that concerns them all: their company.

In this sense, the family council is a means and not an end, and like family protocol, should be tailored to reflect the explicit needs of the business family.