Every family enterprise faces pivotal moments that can alter the course of their business, from leadership transitions to external market forces beyond the team’s control. Maneuvering through these challenges, mitigating risks along the way, and embracing new opportunities are at the core of a carefully designed and implemented governance model.
Family enterprises that aspire to reach this objective can channel the same entrepreneurial energy that helped them build enduring, multigenerational enterprises and business portfolios. A strong foundation of governance can help family enterprises make decisions in areas including capital needs, technology, leadership transitions, and incentive planning. With an informed perspective, enterprising families can unleash the shared vision and values that inspired their business in the first place.
One of the first steps family enterprises can take is recognizing the important issues that could affect the family and business over time. As families grow, so too does complexity as companies may now be supporting growing stakeholder groups. They will need to manage the varied perspectives that exist within a family system. As new generations emerge, company leaders should ensure the appropriate legal and organizational structures are in place—such as wills, trusts, and succession plans—to execute on their objectives.
Furthermore, as organizations diversify into new businesses, geographies, and products, they may find themselves at a disadvantage if their governing bodies lack the discipline to adapt to these transitions. Governance helps family leaders anticipate and address challenges by bringing greater discipline, transparency, and accountability to the issues that matter most.
Through strong governance, enterprising families have an opportunity to build on the richness of their legacies for the benefit of current and future stakeholders, thereby helping them manage each pivotal moment, as a family.
Questions to Ask When Considering Establishing or Refining a Governance Model
- Does our family have a forum to meet regularly to discuss matters of importance to the family and business, and are those interests represented in our governance model?
- Which types of governance structures and practices best serve us today?
- Do we have the right board composition in terms of background, expertise, independent thought, and leadership potential? How are we evaluating its effectiveness?
- Does our governance model consider the alignment between the short and long-term needs of both the family and the enterprise?
Like a great work of art, family enterprises are unique, crafted over time, and highly valued. While no two family enterprises are the same, they are united by a series of pivotal moments—opportunities to grow, evolve, or transform—and preparation is essential for fully seizing those opportunities. Read Deloitte Private’s series exploring eight foundational elements that can help family enterprises maximize the opportunities that arise, including assessing capital needs, building technology infrastructure, long-term incentive planning, and more.
This article is excerpted from Deloitte Private’s “Pivotal moments for family enterprises: The art of governance,” online here.
Read the whole series here.
[Disclaimer] This publication contains general information only and Deloitte is not, by means of this publication, rendering accounting, business, financial, investment, legal, tax, or other professional advice or services. This publication is not a substitute for such professional advice or services, nor should it be used as a basis for any decision or action that may affect your business. Before making any decision or taking any action that may affect your business, you should consult a qualified professional advisor. Deloitte shall not be responsible for any loss sustained by any person who relies on this publication.
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