A commitment to benefit your business, have you made one?
A family charter provides protection to family businesses and the family relationships within them. It is essentially a document that determines the collective views of the family and what they want the family business to stand for. A family charter can add clarity and purpose moving forward to set a clear foundation for the future of the business.
To create a family charter the family members need to participate in honest and open conversations to determine a shared vision on the future ownership and management of the business. However, these conversations are difficult, uncomfortable and often not performed. The journey a family business undertakes through the results of these conversations can be more important than the charter document itself and should not be underestimated.
What does a family charter address?
There are a few core areas to cover in a family charter, but every family is different, and so each charter will be unique to that family. These include:
- What is the vision for the family business?
- What is the purpose?
- Are family values to be integrated into the business?
- What are the rules for family involvement in leadership and ownership of the business?
- What formal governance policies need to be agreed?
- What is the policy on the development of the next generation?
- How does the family engage with the business?
- What commitments are the family making to each other and the future of the business?
What are the benefits of a family charter?
The process of creation and the conversations that take place create many clear benefits from a family charter, and if created early enough in the journey of the business, they can provide a real framework for decision making as the family firm grows. The benefits include:
- Families show commitment and take responsibility as owners of the business
- Creation of the relationship between the business and the family which establishes a shared vision for the future;
- Set guidelines, frameworks roles and responsibilities that can be referred to and improve the day to day management of the business now; and for future generations;
- Binding families together with a shared view that manages the voice and expectations of all family members in and out of the business;
- Providing clarity of purpose and ensuring everyone understands the relationships and interactions between different stakeholders;
- And, guiding long-term focus and strategy to enable all family members to follow the direction that the business is taking.
How does it work?
Creating a family charter is a process of interviews to draw out the views of all the stakeholders around a framework of issues, some of which are outlined above. An independent facilitator often undertakes this process and collates the views, and then there is an open conversation to discuss these and a collective agreement reached to create a way forward.
The journey that each family goes on in drafting their family charter is powerful and enables a consensus to be reached and documented for future generations. Once agreed, many of the significant issues in the business can be solved far more efficiently. These include succession planning, structuring a legacy, conflict prevention and resolution, agreeing on what is fair across the family and setting appropriate remuneration levels. Once documented, the charter provides a good reference point for family and management to reflect on when making decisions going forward and as a tool for any family in business, it should be reviewed and updated on a regular basis too.
Find out more about our Family Business services at elev8 by Mazars
Have Your Say
As champions of the family business sector we are keen to hear your thoughts on some of the areas that we know are challenging for family businesses across the UK today. The 2018 Family Business Survey is being undertaken by Family Business United in partnership with Mazars. Please click the link here to participate in the survey.