A board governs the company. A family council governs the family's relationship to it. Most conflict lives in the gap between the two.
Families in business together tend to invest in strategy long before they invest in governance. The strategy is visible and the governance is not, until the day a decision has to be made and nobody can say who is entitled to make it.
A family council is one answer to that. It is a standing body of family members that deliberates on the family's relationship with the business: what the family expects of the company, what the company can expect of the family, and how those expectations get revised as both change. It is not a board and not a management team. It does not run the company. It represents the owners' family to the company, and the company's reality back to the family.
What it prevents
As a family grows, the number of relationships inside it grows faster. Cousins who have never worked together hold shares. Branches develop distinct financial circumstances and distinct views on risk. The informal channel that worked when everyone lived within twenty minutes of each other stops carrying the load.
A council gives that traffic somewhere to go. It creates a regular forum rather than an emergency one, which is the difference between a family that discusses employment policy in the abstract and a family that discusses it for the first time when a specific nephew wants a specific job. It clarifies how family members relate to the business — as owners, as employees, as neither. And it produces the artifacts that outlast any particular disagreement: an employment policy, a distribution policy, a family constitution.
When it becomes worth the effort
Early on, a council is overhead. The family is small, ownership is concentrated, and the people who need to agree can agree over dinner. The point at which it stops being overhead is reasonably identifiable:
- The second or third generation is entering the business, or preparing to lead it.
- Ownership has spread across several people, or several branches with different circumstances.
- Family members hold shares but have no role in operations, and no clear way to be heard.
- Decisions that affect the family are being made informally, and are starting to be relitigated.
- The family wants its values, traditions, or philanthropy to survive the current generation's involvement.
None of these is an emergency on its own. Together they describe a family that has outgrown its own informality.
How one starts
Councils fail more often from over-engineering than from under-engineering. A charter drafted before anyone has met tends to codify a structure the family has not yet tested.
- 01Convene the conversation before the council: why this, and why now.
- 02Define what the council will decide, and what it explicitly will not.
- 03Seat it across branches and generations, including members who do not work in the business.
- 04Set a rhythm — most councils meet two to four times a year, with an agenda and a facilitator.
- 05Write the charter once the work has shown you what belongs in it.
- 06Connect it deliberately to the board, so family input arrives as counsel rather than as pressure.
The sixth is the one most often skipped, and the one that determines whether the council becomes useful or becomes a second center of gravity competing with the first.
A council is not a remedy for a family that does not want to talk to each other. It is infrastructure for a family that does, and that has grown past the point where good intentions and proximity are enough.
Matt Brown is a founding partner of Aven Advisors. Earlier field notes are collected here.