Governance – a very well-used word; what does it really mean?
Google's definition is: the act or process of governing or overseeing the control and direction of something.
As a chartered member of the NZ Institute of Directors, I could also quote from their publication, The Four Pillars of Governance, which defines the key attributes as determining purpose, an effective culture, accountability, and compliance.
Funders, banks, PE firms, regulators, and various advisors from multiple disciplines will encourage a business owner to value good governance.
How do you determine what’s fit for purpose for your circumstances, especially when your situation involves a family business that’s either already, or has the potential to become, a part of the family tapestry for a number of decades?
So, with the backdrop statement that a long time in business is a short time in family, let's take a quick look at governance options in these family-based circumstances.
It has to work for the family! There is little point in building an empire for the family that they come to despise.
Maybe it's just about the money. There's no end to the number of quotes that suggest that time spent with family is the more fulfilling option.
A level of choice may be out of your hands if a regulator, funder, or other entity has the deciding voice; however, wherever you can, be sure to include people at your governing table who truly understand the dynamics and issues of multigenerational families.
Highlighting some of the attributes those people will have:
Those people think in decades, not just years & quarters.
They’ll always have an eye on the family values and purpose to watch this filter through and be a guide to the business direction.
It’s a person who recognises that optimising the business's potential, growth & profitability is a valuable aspect of enabling the business to become an asset in the family’s portfolio.
They’ll want to ensure the right capability in the right roles. A family business is a commercial operation, not a nursey; there should be principles & guidelines that plot the path for family involvement in the business – at all levels and when a family member is showing future aptitude for involvement, they’ll push for surrounding them with the resources, training and independent coach /mentoring to fast track their skills, knowledge and leadership capabilities.
Following is a snapshot highlighting some key differences between formal governance boards & advisory boards.
As a family with a business involved, it is also vital to recognise the broader components of your family enterprise.
Add to the mix someone who really takes the time to understand the broader aspects of your family circumstances and the driving forces that ignite the business in the first place. You’ll start to see the formation of a governance structure that’s not only fit for the purpose of your specific circumstances but truly underpins a governance structure designed to guide and propel your family for ongoing successful outcomes, whatever your family defines those as.
Credit: The UHNW Institute
At Kimpton & Co., we assist families in designing bespoke governance structures to support their wider families. Having a real focus across all domains of family wealth, we work cooperatively with trusted advisors or asset /wealth management structures, bringing the human elements to the conversation. Recognising the importance of family relationships and the various dynamics that play out, health, well-being, and educational circumstances, we have specialists trained in family governance and decision-making fit-for-purpose structures, leadership and capability development and work with individuals on transitional issues. For more details or a confidential chat, visit us at www.kimptonandco.co