Constructing a family constitution is rarely a straightforward exercise. The steps outlined above can disguise the complexity of the process. It can be an emotional and stressful experience for all concerned.
It's useful to start the process by agreeing some basic ground rules.
• How should the decision-making process actually work?
• Who is entitled to attend family meetings concerned with drafting the constitution?
• Who should chair the family meetings?
• What matters can be decided by a majority vote? What decisions will require unanimous agreement?
• Who should be responsible for translating the group's thinking and decisions into words on paper?
You should also bear the following in mind.
• The decision-making process can become bogged down when the family fails to reach agreement on one or two issues. It can help to take these matters off the agenda temporarily and move on to those matters where agreement is more likely.
• Allow plenty of time for consultation and decision-making. As we've already noted, formulating a family constitution takes time. People will become disenchanted if they think the process is being rushed. If they are given plenty of time and space to consider the issues, and if necessary to obtain outside advice, individuals will often become more willing to compromise in order to obtain a consensus on the way forward.
• Start with the general principles outlined and then work through to more detailed matters. Accept that no constitution can cover every conceivable eventuality, rather it will explain what the family wants from its business and describe the procedure for resolving particular issues as they arise. It's important to recognise that the family constitution is a living document that will need to change and evolve as the family and the business does.
• The dynamics within a family business means that communication is not always effective. Improving communication amongst family members can assist the family resolve family and business issues. It is therefore worth assessing whether a family member is the right person to guide the process in an impartial and effective manner.
It may be more appropriate to engage an independent and appropriately qualified adviser who does not have any bias. Such a person can give the family the benefit of their experience working with other family businesses facing similar challenges. They can also encourage dialogue among members of the family and help them reach agreement on issues. In addition, they can alert family members to relevant business issues that might otherwise be overlooked and that could affect the nature of the decisions reached (e.g. the tax implications of particular business structures).
Overall, the successful development of a family constitution often results in better communication and greater harmony within the family that will help ensure the prosperity and longevity of the business.
