WHAT IS FAMILY BUSINESS GOVERNANCE?
Two things are certain: First, maintaining harmony within a family is complex, and second, running a successful business requires considerable effort and self - discipline. Those two aspects come together in family-owned companies and regularly force family members to make challenging decisions: Do we put family unity before business interests? Can we implement business decisions despite possible family conflicts? Creating a balance between family harmony and business challenges requires constant communication and awareness. However, family governance in the context of business administration is not straightforward, mainly since business owners focus on day-to-day operations to ensure growth and success. There may be situations where a family can negotiate informally at the kitchen table, but business families usually face family and business challenges that cannot be resolved quickly. Sometimes the first and second generations live close to each other and share similar ideas. However, large, multi-generational, and jurisdictional families may require specific standards on discussing important business-related topics and how to reach decisions. That’s when things get complex and may require a structured framework. There are many stories about families that lost control over their business due to feuds and ongoing conflict. But how can families account for the diverse views of their members? How can they ensure that they offer fair opportunities to everyone? How can the balance business and family interests? Family governance provides clarity about roles, responsibilities, and decision-making. It’s the framework for communication and a tool to manage family members’ expectations that they may have regarding the business. A straightforward ruleset enables constructive and efficient discussions to ensure harmony and business growth even in conflict situations. According to research, family governance positively affects the business success and family members’ engagement in the business.