• Service: Enterprise, Family business
  • Type: Business and industry issue
  • Date: 11/21/2012

The pitfalls of constructing a Family Constitution 

The pitfalls
By now, you’re convinced about the need for, and benefits of, a family business constitution. But what about the rest of the family? Getting everyone on board can be more challenging than it seems – inevitably, there will be some family members who remain outside of the fold and even those who seem to thwart your every effort to draft and implement a family constitution!

Let’s take a look at some of the pitfalls of constructing a constitution, and how you – the business owner – can help overcome them…

Pitfall #1: Not everyone is convinced a family constitution is necessary

Education is the name of the game. Host a family meeting (or a series of family meetings) in which you explain clearly what a family constitution is, and how it can benefit your family. Peter Leach, a UK family business consultant, stresses how family constitutions promote harmony, and help set family expectations at appropriate levels. So, appealing to your family’s emotions can help win them over.

In addition to putting forward the business case for a family constitution, talk about how having a family constitution can avoid the need for drama and conflict in the future, helping both business and family life to proceed smoothly.

Pitfall #2: Nobody agrees on how the family constitution project is to proceed

Implementing new projects can be trying with everyone putting in their two cents’ worth! Before you even start to discuss what the family constitution should and shouldn’t cover, call a family assembly and set some ground rules.

Discuss and gain consensus on how developing a family constitution should be carried out. Ask yourself these questions:

  • Firstly, who is to be included in the process – all family members, or is a representative committee to be appointed, instead?
  • Who will drive the process?
  • How will decisions be taken – by a majority or unanimous vote?

Pitfall #3: There’s a lack of consensus about certain issues

Says Leach, drafting a family constitution can actually open up a ‘Pandora’s box’ of sensitive issues. However much families don’t like discussing these issues though, they need to be thrashed out. Such issues, left to fester, can be the undoing of a family business down the line.

While Leach encourages open debate of these issues, he does stress that it’s almost impossible to get every single member of a family to agree on every single issue. Where there is lack of consensus on certain issues then, it helps to set them aside and move on to areas in which consensus can be reached. Often, consensus in these other areas leads to removing the deadlock on contentious issues later.

Pitfall #4: The process is taking too long!

Perhaps you’re eager to get the family constitution done and dusted, so that you can move on to taking care of business. Unfortunately though, when it comes to changing people’s minds or shifting them into a new headspace, time is required. Leach describes how one family business took a full three years to draft their family constitution! While that timeframe seems excessively lengthy, it’s not unusual for the process to take a good year to 18 months.

Be patient and be aware that rushing people can cause them to dig their heels in – people need the time and space to come to terms with the issues at hand.

Pitfall #5: Family dynamics are getting in the way

Families can be nurturing, loving and protective. But they can also be volatile, hostile and competitive. Where intense family dynamics continually get in the way of progress, Leach recommends engaging the services of a professional family business consultant. Such a coach can help:

  • Identify sensitive issues and emotional hot-spots
  • Facilitate dialogue
  • Improve communication
  • Guide family members to seek consensus
  • Draft their decisions in a written family constitution.

Christophe Bernard

Christophe Bernard
I am a KPMG partner based in the French firm’s Paris office, responsible for encouraging the growth of our firms’ middle markets practice across Europe, Middle East and Africa, a majority of that market comprises of family businesses.

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