Advising on governance structure and ownership strategy

Talent and inclination for an entrepreneurial role cannot simply be inherited by the next generation. We believe that only those who take the owner’s role seriously, and perform it professionally, are “legitimate owners”. One crucial key to success is to organisationally – and mentally – separate the role of owner from that of an operational executive. An owner may, but does not have to, take care of operational management directly; he or she can (and in many cases must) delegate. But whatever the setup is, the ultimate responsibility of a family business owner is to ensure that “the family does not destroy the business, nor that the business destroys the family”.

Advice on Governance Structures

AvS – International Trusted Advisors design and help to implement governance structures for privately held companies. Our advisors draw on significant experience with the creation and operation of corporate and family governance systems. Our role is to provide perspectives, precedents, and advice on the different structural options available and, even more importantly, to help owners and other stakeholders achieve a common understanding as to how (and by whom – external executive or family member) their business should be run. We help our clients through a comprehensive process to develop and define the substance, guiding principles and rules necessary to create clear and viable governance.

Developing an Ownership Strategy

Ensuring the long-term success of a business requires an accepted set of fundamental strategic objectives and underlying values. We assist stakeholders to find common understanding, defining the fundamentals of what a business is about and in which direction it should be led.

70% of entrepreneurial families lose control of the business between the first and third generations. In 60% of cases, these problems can be traced back to interpersonal conflicts involving a breakdown of trust and communication. To avoid these risks, family businesses should address questions such as:

  • How to ensure that on fundamental issues management gets the timely, well-founded decisions that they should expect from a competent owner?
  • How to create appropriate, effective monitoring mechanisms?
  • How to ensure that family members working in the company are employed, developed, managed, and remunerated according to their abilities?
  • How to protect the interests of the shareholders who are not working in the company?
The Family Charter

It is best practice that governance systems for business owning families be documented in a “charter”, “protocol” or “constitution”. The name is not critical, and the objective is not just to create a good document. What is more important is the process, a constructive interaction among family members. This includes:

  • Getting clarity about the values, objectives, aspirations and worries of each individual.
  • Crystalizing where there is agreement – and where there is dissent.
  • Trying to achieve a common spirit, strengthening commonalities.
  • Achieving mutual understanding – and trust!
  • Getting stronger – as members of an entrepreneurial family and as co-owners (raising levels of awareness, professionalism, identification, commitment).

We believe it is indispensable to involve all (relevant) members of the family in finding together a “tailor-made” solution adapted to the specific situation of their family. As external experts, we act in tandem with the family not only to draft the charter but to structure and accompany the process, moderate the discussions, and make sure the process yields a workable result.

If you are looking to improve your company’s governance or to develop an effective ownership strategy, please reach out to us.