In my previous columns I introduced a number of topics related to the concepts of heritage planning. In this posting, I am going to share some thoughts on the topic of family governance and how it is implemented at an event we call Heritage Day. 

The overall objective of Heritage Day is to create new experiences that enhance communication and allow the family to experience growth together.  Heritage Day is the formal equivalent of a family reunion.  I define Heritage Day as a special family event that provides the opportunity to implement a family structure, broaden the family leadership base, strengthen family commitments and pass on family values.

Heritage Day generally has six primary objectives: 

1.         Introduce the family to Guided Discovery through exercises with the children

2.         Provide the parents with an opportunity to share their wealth accumulation history

3.         Introduce the family to the parents’ Heritage Statement

4.         Adopt a Family Charter and By-Laws

5.         Formally organize a Family Council

6.         Assess the family’s human capital

We accomplish these objectives through a series of exercises. Although the exercises conducted at an initial Heritage Day vary based on the unique circumstances of a family, the desired outcomes seldom change.  

For those of you who have read previous articles in this series, you are aware that an important goal of heritage planning is to help create a new norm for how a family wishes to function, both now and in the future. 

To make this a reality, we often need to improve a child’s own self-awareness about their personal and/or marital financial matters. We do this by exposing children to their “real inheritance,” i.e. the values, stories and traditions that are the backbone of their family and which represents their parent’s life journey. 

Many families create a Family Council as their family governance structure. At its most basic level, family governance is merely the process by which a family makes decisions as a group.  The ultimate goal of effective family governance is to create a high-performance, multi-generational team.  

Before the family governance structures are designed and before the first meetings are held, there are some questions the family must answer:

1.         What is our purpose in setting these structures in place?

2.         What are our goals as a family?

Each family will approach these questions differently. The answers must be clearly expressed in writing and through conversation. The formation of these structures will put in motion a process through which the younger generations will learn to work together in pre-inheritance experiences. This encompasses much more than setting up financial, legal or family management structures.

A Facilitator and Family Council We encourage the use of a qualified facilitator who is trained in communication techniques for family meetings for the first few years. The old family norms may
have everyone expecting that the parents or grandparents will dominate the meetings, which can suppress participation by the children.  Under the guidance of the facilitator, all generations in attendance can focus on the issues of the family, and participate fully in adult-to-adult conversation. 

As to what the family governance structures look like, the truth is that they end up looking like the family. No two families are alike, and so no two family councils look alike once they are in motion, even if they start from the same set of ideas. We often see families in which any family member age five or over can attend a Family Council meeting, but only those 18 or older can vote. 

Each of the structures the family creates should have at least an annual meeting—sometimes more than one.  Typically, the main meeting of a Family Council will be set up for:

•          Family fun

•          Family development

•          The business of being a family

These meetings are not the time or the place to be talking about the business or investments that may be owned by the family. We have been told by family members who are not involved in family business operations that while most family get-togethers tend to be dominated by conversations about the family business, it is when the Family Council meets that they feel—often for the first time—that they really are a contributing member of the family. 

The successful participation of these family members is going to be determined during the initial setup of the Family Council and the opening few years of its operation. During these years the parents’ role (typically in active consultation with a qualified professional advisor) is to make it possible for the children, grandchildren, nieces and nephews, etc., to work together.  That means the parents are not actively involved in many of the activities. This is, in large part, because the roles and norms of the old family do not apply here, and cannot be allowed to carry too much weight. 

Is this hard for mom and dad?  Absolutely. But it is also an absolute pre-condition for the successful establishment of viable family structures, and the most effective way to get every generation to buy into the process. 

As time passes, the focus shifts to maintaining the integrity of the Family Council, and making sure that it remains flexible enough to change as warranted to embrace the fullness of diversity of people and ideas within the family.  It is important that the policies of the Family Council be inclusionary.  When the right mix is implemented, younger members of the Family Council will begin to take on more responsibility, and leadership naturally passes hands.  The entire family works and plays together for the betterment of the family, as a united, supportive team. 

In my next article I will review how a Family Fund or Family Bank can be used to further the goals of creating a multi-generational family team and share an outline of the types of activities a Family Council may focus on during its first year in existence.