A family business constitution expresses the will of the family for future generations and gives family members a sense of security about how matters will be handled including a method or process for the resolution of differences. The purpose of a family business constitution is to ensure each family member receives predictable and fair treatment.
There is little that can be done to avoid all family business conflicts. A family business constitution sets up the playing field for orderly succession. It also establishes mechanisms to help resolve conflicts before they have damaging effects on the business and on family relationships. Family constitutions are instruments of governance.
Learning how to write and implement a family constitution is important. Family businesses need rules that define expectations, and a family constitution can be written to address common family business conflicts. As families grow and family business issues become more complicated, a written family constitution becomes one of the most important gifts that founders can give to successive generations.
When considering family business growth, an important task of the family business is to ensure the family business assets are compounded over the generations. This means that it is the responsibility of a business successor to work towards leaving future successors with more than was there at the beginning. It's important to have clarity with this task.
Family business continuity involves the development of an agreement on how decisions will be made or terms for employment of family members. The family's Rules of Engagement define expectations and help a family business avoid running into trouble. Many successful family businesses have pre-set ground rules that define expectations.
Managing a family business means that difficult decisions must sometimes be made. If a family business is to survive a rough economic patch, it may be necessary to reduce the number of people the business employs. One way to determine who will stay and who will go is to evaluate each employee's level of flexibility and creative problem solving skills.
It's important that the family members running a business have similar family business values. The real security of family business is knowledge that the family has the same core values, and that in good times as well as challenging times, every member of the family is committed to working together in the best interest of the business.