Advice on developing family governance
Katy Wilder Schaaf and Erik B. Kesting, fifth-generation members of the family that owns E. Ritter & Company, offer these suggestions on developing a governance system that works best for your family business, based on the Ritter family’s experience:
• Take responsibility. Owners must take responsibility for their own needs and goals and articulate those in a useful way to the board. Active owners in family governance leadership positions must drive facilitation of the process.
• Get specific. In a diverse family group, specific questions and scenarios elicit the most specific and information-filled responses. Survey your family members, asking them to state their specific personal financial goals and hopes for the business.
• Involve your senior non-family executives. Work groups that include both non-family management and family members are sometimes indicated — even when you’re working on a family culture issue. Find senior executives who are as committed as you are to perpetuating the family-held nature of the business and engage them anytime your family governance evolves.
• Build trust in family leaders who represent the whole family. In a large family, don’t expect consensus. Most owners will need t make some compromises in their personal financial expectations or goals in order to remain owners. The trade-off is in emotional returns and community impact and the amazing relationships and opportunities that come with owning a family business. Help family members build wealth outside the family business so they have the flexibility to weather changes in dividends or liquidity.
• Expect and acknowledge commitment. Maintaining cohesion in a business-owning family requires time commitment and leadership. Invest in your family leaders and compensate them for their efforts.
• Be patient and persistent. It may take multiple attempts and many years to establish an effective and resilient governance system.