Small Business Management

Family Business Councils Provide Companies With Valuable Support

By January 6, 2020 January 9th, 2020 No Comments
family business councils

If you are part of a family business and are struggling to juggle both family and business, there’s a great resource for you. Family business councils are organizations designed to meet the complex needs of family businesses. These are companies where the second generation—or beyond—has an active role as managers, shareholders, or both. 

Family businesses are not necessarily small. The largest one in the world is Wal-Mart, according to the EY and University of St. Gallen Family Business Index. Although Wal-Mart is publicly traded, more than half of the voting shares are held by the founder’s children. Of course, few businesses of any type become as large as Wal-Mart. 

Sometimes, a business founder makes the choice to keep the company small so that it can stay in the family. Other times, a company is strong because it has several generations of owners dedicated to its prosperity. The oldest family-run business in the world is believed to be Hoshi Ryokan, a Japanese hotel founded in 718. That’s amazing! But for all the thriving family businesses, there are others that fail to survive as independent entities or that lead to deep rifts within the family. These aren’t like other businesses or other families.

Why family businesses are different

Think of the challenges. How will you ensure that relatives who join the business are prepared to manage it? Will future generations carry on the legacy of the business? Can you find executives and board members who understand the challenges of working for a family company? Is there someone you trust to help with succession and estate planning?

Inside the company, the human resources department has to consider how to handle the boss’s children or grandchildren as well as other employees. Who gets hired and promoted, the best person for the job? The family member who is almost, but not quite, the best person? Or the family member who can’t a job elsewhere? Who gets the benefit of a doubt when something goes wrong? Even funding can be an issue. If the plan is to keep the business in the family, then venture capital, private equity, and outside investors are probably off the table. 

Outside of the company, the family members have unique concerns. Parents have to negotiate such matters as determining fair inheritances. Executives have to train family shareholders in how to provide good governance. Everyone wants a rich family life that does not center on the needs of the business. 

How family business councils work

Family business councils are organizations that offer advice on business issues as they affect a family company. They arrange internships for young family members at other family-owned businesses, offer webinars on key transition planning issues, and organize clinics for non-family executives in family companies. These programs are often affiliated with universities and are not cheap, but the members find that the benefits of the training and peer networking are worth far more than the cost. Loyola University Chicago Family Business Center’s program for next-generation leaders is about $20,000 a year, for example.

Some of these programs include founders of companies that are backed by venture capital or private equity. For example, the DePaul University Entrepreneur and Family Business Council looks at founder issues along with family issues. In addition to networking and support activities, its programs include roundtable discussions on human resources, marketing, and information technology—issues that affect managers of all sorts of businesses. 

The universities involved find that family-owned businesses are an interesting area for academic research. “Maximizing shareholder value” means something very different at a large public company than at a multi-generational family business. At Columbia University, the Graduate School of Business curriculum includes family business topics because so many graduates will work with family businesses as employees, clients, or advisors. Public universities are often involved in local economic development efforts, which is why the Cox Family Enterprise Center at Kennesaw State University has an annual family business awards program. And, of course, universities are always looking for donations from successful business owners looking to leave a legacy.

Finding a Family Business Council 

There are family business programs throughout the United States. A little online searching may turn up one near you. A good place to start is with the two main organizations for family business councils. The Family Firm Institute emphasizes research, and the Family Business Network – International offers networking programs. In the United States, most university family business programs are affiliated with both organizations. 

If you think a family business council would benefit your business but can’t find a program near you, consider contacting a local university and asking if their business school would have interest in setting up a program. They are likely to be more receptive if you approach them with several businesses and a promise of funding. Even if it’s only your company and you can’t make a large donation, many university small business development centers may be willing to incorporate one or two panels on the topic into their program planning. This can help you build your support network.

We get it. Starting and running a business is hard. Keeping it going for more than one generation seems nearly impossible. It’s not, though, and there are ways to get the support your company needs to thrive.

Want to find out more?