Survey says: How to draft a family charter with staying power

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Call it a family charter, constitution or a family’s shared purpose, expressed in writing. Enterprising families create these documents to help codify their values, state their business ambitions and provide a guide for conflict resolution. Not surprisingly, they can take months or even years to build if done right.

How do you craft one? We asked three family office experts. They explain what it takes to craft a successful charter, the questions they ask to uncover the most relevant information, and why it never pays to leave younger generations out of the loop.

Gerry Meyer, family enterprise advisor, Meyer Advisory Group, North Vancouver, B.C.

“I have to say I chuckled when I read this question, because that’s actually one I frequently ask families when I start working with them. ‘Why do you think you need a charter?’ If we’re doing this as a check-box exercise, then don’t bother. If you’re looking for a cookie-cutter approach, then you’re not really putting something together that is going to be meaningful and respectful of your family legacy.

“A family charter is a living, breathing document, and it’s going to change with successive generations. In a number of circumstances I’ve started working with families and they say, ‘Yes, we already have a family charter.’ So I take a look at it. And when I ask who was involved in putting it together, it’s mom and dad. The kids say they didn’t have any input.

“Let’s say the next generation hasn’t been consulted to talk about the charter, and rules and policies. They have no skin in the game. When you move from gen three to gen four, it’s less likely family members are actually running the business. So you’re transitioning from owner-operators to investment managers. With that transition, there’s a completely different skillset and dynamics involved. So a family charter needs to be reviewed and evolve continually to reflect the family enterprise’s maturation as it continues to grow.

“Anecdotally, a family I’m working with right now, they put together a charter 10 years ago. Now, generation four is at an age where they’re part of the family assembly and being a part of that dynamic. When I was interviewing each of them, they said to me, ‘You know, we have the family charter, but those values don’t necessarily reflect what we think. We’d like to see a social purpose added.’

In a family charter, we might discuss the concept of fair versus equal. If someone is working at the business, fair is not equal.

Bill McLean, Richter

“So one of the agenda items became a discussion around how to move forward on that. The family set up subcommittees with representation from each of the generations to review and propose new content. Now, the next generation feels much more aligned and connected to, not only the family as a whole, but also with the charter. They helped create it.”

Bill McLean, partner, Richter, Toronto

“If you build a charter and say, ‘Family, here’s the charter. Live it. Breathe it. Do it,’ that’s very different than saying, ‘We’re going to go through a process to make it an actual living, breathing and engaged approach.’ If it’s a rote exercise, you tend to get a lot of dissonance and lack of buy-in from the family.

“My approach is to say, ‘What is it you ultimately want from this exercise?’ Many enterprising families will say, ‘We want it to be actionable, something we come back to and that grounds us – especially during times of change and conflict. I don’t want it to be a big, multi-page document that will just go and sit on a shelf.’

“For most families there’s a collective discussion. Then we might go into individual discussions in order to allow for different opinions and thoughts to come out. When we bring the family back together to really talk it out, I say, ‘What happens when we hit a point of conflict or change?’ Inevitably there’s a difference of opinion and we talk it through based on the feedback.

“In a family charter, we might discuss the concept of fair versus equal. What does that mean to them? If someone is working at the business, fair is not equal. Fair could be they’re being recognized for their contribution and continued success of the business, whereas equal means rights because of bloodline.

“There can be discomfort when that clarity isn’t achieved. If you provide the share of voice to every family member, they feel that they’re being heard. Then you find animosity is replaced with understanding. They might not agree one hundred per cent with everything, but at least they’re clear and have shared their opinion.”

Richa Arora, executive director and senior family advisor, KPMG Family Office, Toronto

“I’ve spent a lot of time developing family charters, and I tend to see a lot of them that have been developed over the years just collecting dust. It’s a topic I’m passionate about.

“A very important part of making a family charter stick – or remain alive – comes from co-creating it and making sure you are involving all the family members. Or revisiting it, especially if it was created by a few family members years ago. We use family charters to make day-to-day decisions but also bigger decisions and to resolve family conflicts.

“I start the process of working through the family values and creating a family vision and mission by making sure all voices are represented, especially if it’s a multigenerational family. I make sure the rising generation plays an active role, sharing what’s important to them. Then I ask them questions like, ‘Why do you want to be a family? In the next five, 10 or 15 years, what does your family mean to you? What do you want to accomplish together as a family, but also individually? What are your guiding principles? What are some of your immediate priorities?’

“For some families, that process can take one year or even two years.

“Once the family charter is completed, I make sure all family members sign it. They are agreeing they’ll be leveraging it when making decisions and actually using the practical tips in it. And if they don’t, as a family adviser, I make sure I point them back to it. Maybe I’ll say, ‘Let’s take some time and revisit this specific policy. Is it still serving you?’

“An independent facilitator helping guide the process makes it go much smoother. I’ve seen families that have tried to do this themselves. And while it can be a great process, it’s hard to separate emotions. It’s family leading the family. But having a third-party facilitator there ensures everyone’s voice is heard. And it’s our job to ask the tough questions. The families find it very beneficial by the end.

“A family charter is not an overnight journey – and it’s not a legal document you just throw together. It should be made with thoughtful planning and with someone guiding it who has the right education. It’s not best practice to create a family charter in two days. Those are the ones that sit on the shelf.”

Responses have been edited for clarity and brevity.

More from Canadian Family Offices:

• Single-family offices, facing headwinds, eye partnerships with multi-family offices
• Estate-plan pitfalls for the 1 million Americans living in Canada
• The right reasons – and a big wrong one – for starting a family office

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