Create a successful family-business constitution
Using a written document to state principles and serve as a practical guide for conflict management and prevention
A family-business constitution - sometimes known as a family charter or family protocols - is partly a statement of general principles. It outlines your business' core values and vision, and your family's commitment to them.
It helps successfully manage conflict in a family business, and a well-drafted document can even prevent conflicts before they start.
Importantly, it is a practical guide for running the business and a framework for handling family issues that may cause disputes.
The process of drawing up a family constitution should be a team effort. It should involve everyone with a stake in the business. The document should be regularly reviewed.
How to structure the constitution of your family business
A typical family-business constitution might include the following sections:
- business goals, vision and values
- leadership
- rights and responsibilities of shareholders
- management structure
- entry principles for family members
- criteria for succession
- exit policies
- rights, responsibilities and obligations of family appointments - pay, incentives, performance management and reporting lines
- rights, responsibilities and obligations of family members not working in the business
- appointment and rights of non-family board members, management and employees
- training, remuneration and appraisal of employees - both family and non-family
- developing the next generation
- involvement of non-executive directors and other outsiders
- communication channels
- dispute-resolution procedures