Victorio Consulting Blog - Thinking Outloud

Thinking Outloud

Thoughts on succession, leadership coaching, building synergistic teams and change management systems for family businesses and organizations.

The Family Council: How to successfully approach planning decisions with family members

The Family Council: How to successfully approach planning decisions with family members

Unmet expectations or anxiety about the unknown can seriously undermine family harmony. Whether there is conflict or not regarding your succession plan for the family business, or the division of assets between your children, you can side step potential years of tension and upset by tackling these tough discussions step by step with the guidance of a trained facilitator. Knowing, even if you don’t like the answer, is most often better than being in the dark.

One of the best venues to discuss the business of the family is in a “family council.” What we’ve learned is that people should separate family gatherings from family business discussions. A more formal setting encourages a more professional and organized approach, often by having advisers and a facilitator present to help explain things in a way that won’t upset or confuse.

Most misunderstandings are based upon good intentions.

Initiating a family council by learning about the best ways to approach one another as difficult decisions are made makes it much easier to talk about other complicated issues. Using the ProScan Personality Index tool developed by Professional Dynametric Programs (PDP), we help families and business teams become aware of their natural styles of communication, leadership and organizational styles. Often conflict happens due to different personality styles, rather than it being intentional. The PDP survey provides an in-depth understanding of natural styles, assesses the stress the individual is feeling from their priority environment (how one feels others expect them to be) and measures the gap between natural and expected performance. This is a powerful tool that can enhance your understanding of yourself, your family and business team.

How does a family council work?

Once a family makes a commitment to using a family council, we recommend you develop a “Family Charter” to define the purpose and vision for having a family council and helps to define the core values that are important to communicate to the next generation. Objectives and goals are defined, which helps to keep everyone focused on creating an agenda for each meeting. With regular meetings and the integration of younger family members as they mature, this mechanism for problem solving and planning for the future will be passed on to each generation long after it was initially created, contributing to building the family legacy.

It is important for your facilitator to understand what you want to communicate to your family and also to survey each of the involved family members regarding their questions, concerns and interests, such as:

  • What do your children know about your estate plans?
  • What do you want them to know?
  • What do your children want to know about?
  • What is your vision of the future?
  • If there is a family business, to what do you attribute its success, and what are some ways you can think of to perpetuate that?

What kinds of issues are discussed in a family council?

In laying out an estate or succession plan where a family business or any kind of considerable assets are involved, it is important to layer in the pieces of information to future stakeholders.

We explain the concept of the estate plan and the succession plan as generally or as specifically as is appropriate. It is important to provide understanding to siblings who are involved in the business are going to inherit voting stock in the business, and the non-active siblings might either receive non-voting stock or other assets like real estate or securities or something of a fairly equitable range.

Foundational elements for structuring your family council:

Purpose:

  • To provide an organized and structured forum to educate active and inactive family members on the dynamics and details of estate and business succession planning.
  • To establish a forum in which family members can learn to or illustrate that they can interact harmoniously and effectively.
  • To provide a forum for periodic discussion of the business of the family, not just the family business, that impacts all family members.
  • To avoid the relationship trauma or shock of surprise.

The Role of a Facilitator is to:

  • Get you unstuck and moving forward
  • Enroll family members
  • Provide insight on family dynamic & personality styles
  • Keep everyone on task
  • Apply accountability
  • Establish agendas
  • Provide objective perspective
  • Coach everyone through the process
  • Provide a safe environment to protect family relationships through delicate or difficult discussions
Membership Policy
  • Membership is by invitation only.
  • Various family members and supporting parties are invited to participate, contingent upon cooperative, supportive and collaborative behavior.
  • Membership is a privilege, not a right.

Who should consider a family council?

There are various levels of family councils, and it is suggested that families of more than one generation who have a family business or significant assets absolutely must consider this kind of vehicle.

A family council is an ongoing endeavor. It needs to become a part of the way a family addresses the business of the family. And it may not always be related to estate planning — it could be used to talk about difficult family matters, charitable gifting or other ways for the family to support the community. You can also use it to introduce family members to a financial planner or to broach the subject of insurance or investing to help the kids learn how to handle the money they’ll eventually inherit. A family council should set an atmosphere where everyone knows they’re going to be professional and courteous, even when making difficult decisions.

Every family needs to be able to communicate what their planning is to those impacted. The worst thing that can happen at the time of loss of a parent is to also experience the shock and surprise of not understanding what they had intended. To sacrifice family harmony for lack of understanding is not usually a desired legacy. Leaving a legacy of love and harmony, and then security and business success, would be any business owner’s dream.