Why a family charter is important for a successful business strategy
Why a family charter is important for a successful business strategy
November 2024 - In a family business, business and emotional interests are often closely intertwined. This can lead to complex and sensitive situations with a potential impact on business strategy and growth. A family charter, also known as family protocol, is therefore an important document.
In a family charter, you lay down the ground rules and agreements between the family and the company, also ensuring the continuity of the company across generations.
Composition of family charter
Typically, a family charter contains the following elements:
Family mission, vision and values: this includes the fundamental beliefs and values that the family wants to pass on to the business. It describes the mission of the family business, and what the family wants to achieve in the long term. This creates clarity and forms the basis for strategic decisions.
Ownership and share ownership: the charter lays down the rules around ownership and the transfer of shares between family members. This helps to avoid conflicts in cases of succession or sale of shares, for example. It can also determine which family members can become shareholders and under what conditions.
Succession planning: this section deals with the criteria for succession within the company. It includes agreements on who qualifies for leadership positions and under what conditions, such as education and experience. This can ensure the continuity of the business when leadership passes to the next generation.
Relationship between family and company: the charter regulates the relationship between the family and the company. This includes, for example, rules for hiring family members in management positions, as well as compensation and assessment of their performance. Transparency and clear agreements on these topics help avoid nepotism and promote objective decision-making.
· Decision-making and conflict resolution: guidelines are established for how decisions are made, especially in cases of disagreement. This may include, for example, that certain decisions must be approved by a family council or family committee. Conflict resolution procedures are also established to prevent escalation.
Maintaining continuity
A family charter is a powerful tool for maintaining continuity because it provides clear ground rules. The document ensures that everyone in the family has the same goals and adheres to the same principles. This prevents time-consuming conflicts, with the family and the company remaining focused on long-term goals. It also provides clarity on succession, which is essential to ensure the survival of the business.
Strategic advantage
Moreover, drawing up a family charter is a good strategic move as it promotes long-term stability. It gives investors, employees and other stakeholders confidence that the company is well structured and that there is a plan for the future. It also helps manage the emotional dynamics within the family, allowing the company to be run in a more businesslike and professional manner. This strengthens business operations and makes the company more resilient in times of change.