LUTZ BUSINESS INSIGHTS

 

family governance + not an act

lisa strutzel, family office services director

 

For a family enterprise to sustain its wealth, acting collaboratively is required. This need for cohesion leads to the creation of structures and processes that guide the family’s behavior as it navigates the complexities that come with growth. Developing a family governance system is an evolutionary process. It typically begins with informal family gatherings where in-depth communication occurs and ends with the formation of policies and practices that govern the family’s joint decision-making.

MISSION STATEMENT

Making unified decisions requires communication between family members. Communication is key to fostering cooperation and collaboration, essential to building relationships that bond the family together. The governance process begins with families determining commonality as it relates to values and vision and using that awareness to craft their family mission statement. The mission statement defines the guiding principles of the family. “If a family has a statement of principles that can be referred to, or its family mission, then succeeding generations have a core of basic principles to which they can adhere”, according to Dennis T. Jaffe, PH.D.[i] The mission statement provides the framework for the creation of governance structures that are aligned with shared family values.

POLICIES

Once a family defines its shared vision, it uses that awareness to develop policies that oversee family interaction. These policies, sometimes referred to as a family constitution, should be reasonable, clearly written and updated as dictated by changing family circumstances. Policies adopted by families vary, covering issues like:

  • Conflict resolution
  • Succession planning
  • Role of spouses
  • Trust distribution guidelines
  • Code of conduct for meetings
  • Education expectations
  • Philanthropic goals and objectives

The process of creating the shared guidelines can be as valuable as the documents themselves as evidenced by Barbara Hauser, a family governance expert. “Many families slowly get used to the idea of having a family constitution, and by the end of the discussions and drafting, they feel a proud sense of ownership.”[ii]

STRUCTURE

How a family decides to practice governance is dependent on multiple factors, such as the family’s size, complexity, and if they have a joint operating business. Many families establish assemblies and councils to act as their leadership bodies. The assemblies are typically all inclusive being composed of adult family members and their spouses. The family council is the elected governing body of the family. Its duty is to implement the wishes of the family, including planning the family meetings, drafting changes to policies and practices, and doing whatever else is necessary for maintenance of the governance system. More complex family structures may also have various committees and boards that oversee their businesses, philanthropy, family office or other holdings. 

Good governance practices are essential to family sustainability over generations. They are rooted in the family’s values and vision and grow into enduring policies and practices if properly preserved. Implementing a collaborative system of governance is not an act; it is a deliberate process that stands the test of time.

 

i Jaffe, D. T. (2003, April). Six Dimensions of Wealth: Leaving the Fullest Value of Your Wealth to Your Heirs. Retrieved from http://dennisjaffe.com/download/six-dimensions-of-wealth-leaving-the-fullest-value-of-your-wealth-to-your-heirs/

ii Hauser, B. (2019, March 6). What are the Best Ways for a Family to Make a Decision Together? Retrieved from http://www.campdenfb.com/article/what-are-best-ways-family-make-decisions-together

ABOUT THE AUTHOR

402.763.2974

lstrutzel@lutz.us

LINKEDIN

LISA STRUTZEL, CPA, CAP® + FAMILY OFFICE SERVICES DIRECTOR

Lisa Strutzel is the Family Office Services Director at Lutz with over 14 years of past experience as a family office executive. She is responsible for assisting high-net-worth clients manage their family enterprise. 

AREAS OF FOCUS
  • Family Office Services
  • Financial Reporting
  • Philanthropy and Legacy Planning
  • High-Net-Worth Families
AFFILIATIONS AND CREDENTIALS
  • Certified Public Accountant
  • Chartered Advisor in Philanthropy, CAP®
  • Family Office Exchange, Integrated Wealth Advisor Council Member
  • Purposeful Planning Institute, Member
  • Nebraska Society of CPAs, Member
EDUCATIONAL BACKGROUND
  • BBA, Iowa State University, Ames, IA
COMMUNITY SERVICE
  • The Hope Center for Kids, Board President, Past Treasurer
  • CAP Advisory Board Member

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