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.
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.
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]
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
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
- Aviation Matters
AFFILIATIONS AND CREDENTIALS
- Certified Public Accountant
- Chartered Advisor in Philanthropy, CAP®
- Purposeful Planning Institute, Member
- Nebraska Society of CPAs, Member
- BBA, Iowa State University, Ames, IA
- MCC Applied Finance Institute Advisory Board
- The Hope Center for Kids, Past President and Treasurer
- CAP Advisory Board Member
- Women Investing in Nebraska (WIN), Volunteer
- Fantastic Family Meetings + The Key is in the Planning
- Family Office FAQs
- Resilient Family Capital
- Resilience Skills: What You Need When the Going Gets Tough
- Family Businesses + How to Operate Like the Pros
- Eyes Wide Open + Mitigating Risk
- Financial Fitness for the New Year
- Family Philanthropy + Creating a Shared Legacy
- Family Governance + Not an Act
- Family Meetings + Strengthening the Bonds That Bind
- What is a Family Office?
- Engaging the Next Generation With the Family Foundation
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The Provider Relief Fund (PRF) Reporting Portal opened for Reporting Period 2 on January 1, 2022, and will remain open through March 31, 2022, at 11:59 PM ET. What you need to know:
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- What’s New in Reporting Period 2 Fact Sheet
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Providers who were required to report in Reporting Period 1, but did not report:
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Upcoming Reporting Requirements:
|Period||Payment Received Period||Deadline to Use Funds||Reporting Time Period|
|3||January 1, 2021, to June 30, 2021||6/30/2022||July 1, 2022, to September 30, 2022|
|4||July 1, 2021, to December 31, 2021||12/31/2022||January 1, 2023, to March 31, 2023|
Last Updated: 1/14/2022
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