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How to get buy-in on family governance: Avoid ‘big, abstract systems and processes’

Rather than relying on best practices, advisors should let families take the lead

Wealthy families are busy, and it’s not uncommon for founders to allow governance principles to move to the back burner. Many are simply too focused on running their operations to spend enough time defining key governance practices or setting up advisory boards or committees.

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They often need assistance in getting the ball rolling, whether that means establishing a family forum to discuss how the business will be run, setting up a communications strategy or choosing educational initiatives for the next generation.

What’s critical here is to avoid approaching the process with a “best practices” lens, says Matt Fullbrook, founder of Ground-Up Governance, a Toronto-based multimedia platform devoted to making governance more accessible. He adds that family offices aren’t looking for generic approaches, and they need help in understanding what good governance looks like for them.

“I don’t think there’s any one model or approach or concept that is best,” he says.

Larger FOs may need more complex governance structures such as a board of directors or a family business advisory board, he says, but smaller offices may simply need to develop a process that only the family adheres to—and that is well-defined and easy to follow.

Rod Burylo, associate portfolio manager at Equate Asset Management in Calgary, says a family should drive the process rather than be pressured to engage in governance decision-making by an advisor.

“One of the things I struggle with is this idea that the role of an advisor is to persuade or get people to do things,” he says. The advisor’s role should be to focus more on record keeping, documenting and communicating. “It’s really about the advisor supporting the client,” he adds.

A few factors that can help determine the best path to governance: a careful analysis of the family’s needs, the size of the family business, the culture, and the philanthropic goals of the owners. 

Here are some ideas for setting up a governance plan for a family business.

Ask the family to lead the process

Advisors should watch for clues as to how the family wants to proceed with governance initiatives—and then turn those into catalysts for action, Burylo says.

“If the client says, ‘I am concerned about the next generation,’ the door is wide open to say, ‘What can I do to help you achieve that goal?’” he adds.

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Develop a plan

Advisors need to guide the family on how they’d like to run and manage their businesses, says Henry Korenblum, president of Korenblum Wealth Inc. in Toronto.

They could work together on identifying which family members are active in the business and which are eligible for voting and ownership rights, for example, or whether to establish a policy regarding the hiring of family members—or outsiders.

If a family doesn’t address those kinds of concerns in a family charter, disagreements could result. “Through proper governance, you can think through these issues in a healthy forum, and then hopefully avoid potential conflict,” Korenblum says.

Approach with positivity

Too often, advisors approach family governance with a bit of a catastrophe-avoiding mindset, says Fullbrook. He suggests that a reframe is necessary.

Advisors should instead say, “‘How do we walk in the room and aim to do a great job?’ instead of framing it as ‘How do we walk into the room and avoid catastrophe?’” he says. “Because I think that’s a really important difference.”

Advisors also should stop focusing on building “big, abstract systems and processes and structures” and instead focus on the family’s actual values and needs.

Develop a process to find the right people

In a situation where a family business requires a board of directors, advisors shouldn’t be hiring these board members based only on their titles, says Fullbrook. Instead, they should be chosen for specific skills and values.

“It’s the difference between someone who walks in the room and is unbelievably useful versus someone who’s just filling a seat,” he says.

In conversations with the family, an advisor can help determine whether they want a person “who’s a careful listener and able to synthesize multiple perspectives, or someone who’s got the courage or confidence to challenge conventional thinking, or someone who’s willing to change their mind when presented with new information.”

Boost communication to ensure buy-in

Encouraging the family to meet regularly to discuss governance, as well as implementing policies to engage the next generation, can go a long way in ensuring the family’s future success, says Korenblum.

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If a family wants to chart a philanthropic path, for instance, they should involve younger family members in that discussion.

“Bring everybody together around the table,” he says, such as at a biannual or annual meeting. “We’ve had families sit around the table and discuss: ‘What causes are important to us this year? What do we want to support?’ I think that’s something that’s very important.”

Closing thoughts

Korenblum says that advisors have to remember that their job is not to hand down instructions but rather to respond to a family’s governance needs.

“Our role is to help guide the family toward achieving those goals. And if they lack tools, we need to help the family in developing those tools,” he says.

“It’s a bit of a balance, a bit of a dance.”

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