Complex words and well-paid professionals often impede progress. So an early issue of Family Office Perspective has to address the incredible consulting field of Family Governance that covers most of my favourite topics, but is also often a little too complex. This consulting field delivers value to families similarly to how management consultants advise businesses.
Let me know when I’m being complex because I’m here to empower!
Governance is certainly a complex topic. A lot of time and attention goes into this field with good reason. Governance is ultimately about how thoughts and conversations create decisions that beget actions. Governance is too often prescribed through lawyer’s eyes though. They focus on establishing policies and procedures that clarify the rules that govern a family’s affairs. Those rules establish parameters delineating good decisions from bad. This is effective governance because it improves the probability of good decisions and from those good decisions, effective actions follow.
Come on, we cannot let the lawyers deliver the most valuable forms of governance!
Certainly, a strong family constitution and well thought out policies and procedures have a very strong impact on family activity and yes, they are helpful governance tools. However, I’ve known since the very beginning of my journey into the family governance field that there is a lot more to effective families than rules. The real family governance is derived from family culture. I learned this from James E. Hughes whom I mention regularly.
But I also learned this from my own observations. The most successful families I know seem to innately understand what they stand for and are great at celebrating behaviours that fit within their core values. Neither “innate understanding” nor “celebration” would fit within a lawyer’s rules:
Lawyer: “now to New Business topic #5, the Article 6.3 infraction. You can clearly see in the Article that we expect family members to celebrate each other’s successes. So Adam, your failure to attend Shoshana’s Bar Mitzvah results in a penalty as selected by the Celebratory Review Panel at the next meeting that they are able to reach Quorum according to Article 14.4 where the Panel will select your penalty from those listed in Column B of Schedule 1.”
Adam: “I texted my cousin my congratulations, and we FaceTimed the next week, I think we are good.”
Lawyer: “sorry, the rules are very clear.”
Peter Drucker famously said that “culture eats strategy for breakfast.” Strategy is clearly important to business success, and yes I concede that rules are important to family success.
But culture is far more powerful and important.
So since family governance is about how families take effective action, then clearly the high-achiever families are likely the families filled with love, mutual interest in each other’s success, strong listening and communicating abilities (especially important: strong storytelling) or generally speaking, have strong cultures. Those lucky families will be able to influence individual and collective behaviour really effectively. They will have strong governance even if they don’t have written rules.
While there is no way to achieve family harmony, and there is very little chance that every single family member will align on core values, there is at least a strong chance that families can develop a caring family culture. We can all be inspired to support the growth of our family members and we can all create an environment where healthy actions outweigh destructive ones. These are the families that will thrive for generations whether or not they happen to maintain and grow their financial assets.
So I believe one of the two keys to family governance is family culture, the next key is the topic of next month’s Newsletter.
For those looking for a little more on this perspective, a quick reminder on how the wealth equation relates to this topic. The equation is:
FW = R (HC + RC)
Your family wealth is equal to your resources multiplied by the total of your human and relational capital pools.
FW: Invest time and financial resources on family governance. Applying financial resources to facilitators will greatly assist in effective family meetings (and informal get-togethers).
R: Spend resources on traditional governance topics like family constitutions and other policies and procedures. But the best use of resources is spending time and intention on building strong individual family members with strong relationships.
HC + RC: Both the individual and the collective grow more valuable with a strong culture supporting them.