Update on Family Council Research

Family Council Update: What Works and
What Doesn’t
Carmen Bianchi & Keanon Alderson
Family Firm Institute
Family Council Update
• Carmen Bianchi
Director Entrepreneurial Management Center and Family Forum,
lecturer, San Diego State University,
San Diego, CA
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Keanon Alderson
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Associate Professor, Robert K. Jabs School of Business
California Baptist University
Riverside, CA
[email protected]
© Family Firm Institute, Inc. 2011
Purpose
What is meant by the term; Family Council?
• Lack of Generalized Agreement
• Lack of Literature
• Lack of Empirical Study
• Update Ongoing Research
• Proposed Working Definition
• Call for Research
© Family Firm Institute, Inc. 2011
What is Meant by the Term Family Council?
• Confusion between terms: boards, forums, meetings, assembly's,
ownership or shareholder councils.
• Changing definitions: “Sons of Bosses” John Ward (1987),
“In larger families, the meetings are organized and run by the
family council, a body elected by family members to oversee the
affairs of the family as a family. In smaller families, the family itself
operates as a council and plans the meetings” (Ward, 2004).
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Lack of Literature and Empirical Research
• Ebsco Host Business Source Elite database search
• Search Term “Family Council” (Title), 1992-2011, four hits
• Limited Results to Peer Reviewed Journals, one hit
• Expanded (Abstract) 12 hits, three peer reviewed, no Empirical Research
• In a search of Family Business Review, 50 articles were identified, by
expanding to all text. None of the articles had a specific focus on family
councils, and none had family council as the title of the article.
© Family Firm Institute, Inc. 2011
Selected Literature
• 10% of 73 Italian Firms had a Council (Corbetta and Tomaselli, 1996).
• 7.3% of 192 Finish first, second, and third generation family firms had
family councils (Mustakallio, Autio, and Zahra, 2002).
• (Kaslow, 2006) discussed family councils from Brazil, Canada, Saudi
Arabia, Scotland, The United Kingdom, and the United States.
• Jaffee (2005) described the two dimensions of family and the business.
The family council is utilized as a tool of the family to discuss issues of
importance to both the family and the business.
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Selected Literature (cont).
• In a study of 231 family firms in Washington State, council use was found
to be higher in firms with less than $10 million in sales, and for those with
more than $50 million in sales. Greater use of councils found among
more mature firms (Leon-Guerrero, McCann, and Haley, 1998).
• Aronoff and Ward (2002) discussed family councils as most usually found
in what they referred to as “Stage Three” or the cousin consortium.
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Handler (1994), in a review of succession research, proposes the
creation of family councils as a way to increase communication and
discussion regarding succession.
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Model of Family Council Interaction with Other
Areas (courtesy FFI)
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Current Research Study
• Study Population: Family Business Academics, Family Business
Consultants, Family Business Owners
• Preliminary Results: A disconnect between what academics
discuss, what consultants are recommending, and how family
business owners understand its usefulness.
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Conclusions: Call For Research
• More Empirical Research
• Strong Research Methodologies
• Generally Agreed Upon Definition
• “Researchers must continue to make efforts to communicate
research findings in a manner conducive to practitioners” (Sharma
2004, p. 26)
© Family Firm Institute, Inc. 2011
Proposed Working Definition
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A family council is a platform where the voices of family members of a family
business can be heard. It is not a legal entity and has no fiduciary responsibilities;
however, it is the governance structure of a family business wherein the emotional
issues of a family business are addressed. It is rarely found in corporate America,
but the family council does and should create the vision and articulate the values of
the family business. It is where family members create the criteria and guiding
principles for family members entering and exiting a family business. Pertinent
issues such as compensation, employment, leadership, succession, education,
mentorship, and development are discussed, and governance structures are
created around these issues. Officers are elected usually for a two-year term and
consist of a chair (CEO or Chief Emotional Officer) secretary, treasurer, historian,
and social venue officer. In many family councils, the entire family is welcome to
participate. The members vote, and in larger organizations, forward their decisions
to the board of directors for implementation (Bianchi & Alderson, 2011).
© Family Firm Institute, Inc. 2011
Family Councils Definition:
• A Family Council is a form of governance structure for family owned
businesses, which serves as a platform for family members “voice” to be
heard. It is not a legal entity, however, it gives the company the vision and
articulates the values of the family business. A family member who serves
on the Board of Directors is usually the liaison between the two
governance structures.
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© Family Firm Institute, Inc. 2011
Research Questions
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Are you aware of the concept of a family council?
Do you have a family council?
If not, why not?
Would you consider having a family council?
Why?
Who would be/who is a part of your family council?
If yes, when was it started?
Has your family council been effective?
Can you describe its effectiveness?
If not, why not?
How often does your family council meet per annum?
How structured are the meetings (e.g., agenda)?
Who runs the meetings?
Who calls a family council meeting?
Who attends these family council meetings (spouses, in-laws)?
Are there rules to the meeting?
© Family Firm Institute, Inc. 2011
Research Questions
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Do you have a facilitator? If so, is it a family member or non-family member?
What decisions if any does the family council make?
Is there a representative of the family council on your Board of Directors?
Do you have a Board of Directors?
Do you have a Family Creed/Constitution?
If so, do you adhere to it in the true sense of the word?
Is there any incentive for being on the family council?
To what degree is there a sense of stewardship among family members?
Is the family council an “Open Platform” for all family members to have a voice?
Describe the culture of the family (open, casual, rigid, top down, secretive, respect of non
family members)
Does everyone treat each member with respect and common decency?
Does each family member have the right to make an independent decision?
If so, how enforceable is an independent decision?
Does it go to a vote?
What can you recommend to other families regarding the creation of a family council?
© Family Firm Institute, Inc. 2011
SWOT Analysis
• Strengths: What is working? What does the council do well?
• Weaknesses: What is not working? What does the council do that needs
improving?
• Opportunities: Is there anything the family council should be doing? Are there
any opportunities the business should exploit to strengthen the family council?
• Threats: Is there anything that threatens the effectiveness of the family council?
Could you elaborate?
© Family Firm Institute, Inc. 2011
References
—Aronoff CE, Ward JL (2002) Family meetings: How to build a stronger family and a stronger
business. Family Enterprise Publishers, Marietta, GA
—Bianchi, C. & Alderson, K. (2011, in press). Family Councils: What do we really know about them
and ought to know? In Carsrud, A, & Brännback, M. (Eds.). International Perspectives on Future
Research in Family Business: Neglected Topics and Under-utilized Theories. Springer
International Entrepreneurship Series. NY, Springer Publishing
Corbetta G, Tomaselli S (1996) Boards of Directors in Italian family businesses. Family Business
Review, 9 (4): 403-421
Dickstein, S. (2003). The Family Council: A Useful Adjunct to the Functions of the Wealth
Management Professional. Journal of Wealth Management, 5(4), 12. Retrieved from EBSCOhost.
—Handler WC, (1994) Succession in family business: A review of the research. Family Business
Review 7: 133-157
Jaffe, D. T. (2005). Strategic Planning for the Family in Business. Journal of Financial Planning, 18(3),
50-56. Retrieved from EBSCOhost
Kaslow F (2006) Handbook of family business and family business consultation: a global perspective.
International Business Press, New York
© Family Firm Institute, Inc. 2011
References
Lansberg, I. (2006). The Family Council. Directors & Boards, 30(4), 49.
Retrieved from EBSCOhost.
Leon-Guerrero AY, McCann JE, Haley JD (1998) A study of practice
utilization in family businesses. Family Business Review 11: 102-120
Mustakallio M, Autio E, Zahra SA (2002) Relational and contractual
governance in family firms: effects on strategic decision making. Family
Business Review 15: 205-222
Sharma P (2004) An overview of the field of family business studies: current
status and directions for the future. Family Business Review 17: 1-36
Ward JL (1987) Keeping the family business healthy. Jossey-Bass, San
Francisco, CA
Ward JL (2004) Perpetuating the family business: 50 lessons learned from
successful families in business. Palgrave Macmillan, New York
© Family Firm Institute, Inc. 2011