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Managing those tensions

1 January 04

A Family Council, sitting alongside the main board of a family business, can play a vital role in fostering the essential element of trust

by Bill Gordon

Contrary to popular belief, many family businesses in Scotland are getting their act together, professionalising the management of both the business and the family to create greater all-round stability, unity and direction.

In Scotland we have learnt a lot from our European counterparts and from our colleagues in the private sector closer to home, and I believe we are shrugging off the age-old tendency not to talk amongst trusted company about the more emotive owner-related issues. This move towards greater openness and trust should prompt a more enlightened perspective from our professional advisers who either wittingly or unwittingly can exacerbate the tensions, doing more harm than good.

Setting up a family council is, I believe, an invaluable first step, especially for businesses where the ownership has moved on from brothers/sisters to cousins and the heady cocktail of business and owner needs becomes more complex and difficult to deal with when the proverbial hits the fan.

To put you in the picture, the William Grant & Sons Family Council is a firmly integrated addition to our governance structure, sitting alongside the main board, comprising a representative body of our shareholders. We meet four times a year for a full day to discuss a strategic, non-operational agenda which is carefully prepared and minuted, and forward our recommendations to the board via the company chairman.

In setting it up we chose to work with our company secretary, whose input was invaluable in steering us towards the most effective constitution, matching our objectives and values with the need for a formal structure.

We were advised that we should avoid an excessively rigid constitution, as this would undermine the spirit of openness and respect that is essential to our success as a forum. The representation around the table matches the shareholding by family branch, with nine members and myself as chairman. We make recommendations for action, not hard and fast decisions, to encourage a collaborative relationship with the management board. These are based on a collective consensus, with one person one vote around the table as opposed to voting by shareholding. This gives the council sufficient structure to operate while upholding our core values, reaching agreement in the interest of the group, not individuals.

I would urge advisers to recommend a similar approach, balancing the need for structure with a more urgent need for openness and respect among the group. Our experience shows that as the family council matures, the constitution should evolve to incorporate more structure in certain aspects such as the election process for the chairman, rotation of members and election to working groups such as our Next Generation Group.

My role as chairman was created in 1998 out of our commitment, after a fair deal of soul searching and no small number of heated debates, to managing our responsibilities as shareholders more professionally. This was against a background of commercial success and a mix of inevitable tensions which my father and uncle cheerfully remind us are nothing new, and are in fact quite healthy. I should add that I am something of a black sheep having never worked in the business, choosing to plough my own furrow in the media and communications sector.

Short straw or what?

Actually not! While it has not been exactly plain sailing, I am delighted to have played a part in connecting us more closely as a family, and in developing a more progressive culture of enlightened ownership, and trust. 

At each of our meetings, the result is a hugely beneficial open discussion, a greater sense of structured involvement without “interfering” and, while we may disagree on some issues, a greater sense of unity and purpose – all of which is good for the business which doesn’t have to second guess where the shareholders stand.

Trust is the key word here, because without it the meetings are meaningless. At best, we would have a table of cynical passengers, and at worst the dynamic deteriorates into childish self-preservation, manifesting itself in bonanza time for lawyers, accountants, heart surgeons, psychologists and so on.

It does not have to be and should not be this way.

One of the ironies of sharing problems and networking with other family businesses is the realisation after a few drams that perhaps we are not as bad as we thought – sad but true.

I know of two prominent family businesses who are currently well down the legal proceedings road after tensions have blown up, followed by the individuals involved scurrying off to their legal advisers. The cost to the business is not yet known but is likely to be substantial. The cost to the family relations is incalculable, and the benefits to the professionals will in my view be a short term gain vastly exceeded by the long term loss of trust, respect and business in the wider family business community. Being open, we at Wm Grants are no angels, but we have not resorted and should never resort to court battles to sort out our differences.

Avoid differences becoming personalised

Why do professional advisers not act more responsibly in these cases, urging the family to meet and discuss the issues as a group instead of taking the more partisan route? I don’t know the answer, but please bear this in mind – differences of opinion in family businesses can and do become personalised. Grown men and women revert to teenage behaviour.

There is an important role for professional advisers to family business owners – we have recently engaged an adviser to our family council to address a number of current issues. Their remit is 100% to the group, not the individuals. This I believe is healthy and should be the way forward, with more professionals resisting the poisoned chalice of personal bust-ups and embracing a broader, more enlightened approach in line with our more progressive outlook.

For more information check out www.familycouncilworks.co.uk