Research over the past three decades suggests that family assemblies, family councils and other governance structures help a business-owning family sustain their enterprise over multiple generations. As families become aware of the value of governance activities, they wonder how other families set up their assemblies and councils, how much they spend on governance and how the various governing bodies operate.

After a request at a recent Transitions conference, we decided to gather concrete information on how enterprising families conduct family governance. Subscribers to Family Business Magazine’s newsletter were asked to complete an online survey in December 2019 and January 2020. We received 320 responses.

Of the total who completed the survey, 35% (113) report that their families have a family council, the basic unit of family governance. (See sidebar for a definition of terms used in this report.) Their responses show substantial engagement in family and business governance. Most of the data in this report are from this subset of 113 families.
Your family can use this information as a benchmark to assess your own practices, as well as to consider pathways to develop or expand the nature and extent of your family governance.

The vast majority (90%) of the 113 families with a family council have been in business for many years and continue to operate their original, legacy family business. Most are more than 40 years old:

In addition to their legacy business, 35% of the families have diversified to include a family office, an entity that manages family wealth and family activities that lie outside the family business. Of this group, 30% have a single-family office; the others are affiliated with a multi­family office or other investing vehicle.

Family assemblies: Convening the whole family
What is special about a family business is that the owners aren’t just business partners; they’re also related to each other. This connection means they share interests, values and concerns beyond business. They want to build upon and share a legacy and family identity, and to be engaged together in activities centered on more than just making money. They have philanthropic goals and ties to their hometown. They may share ownership in a vacation property. Governance is a pathway through which family members organize to fulfill their larger mission.

Having passed beyond the first generation, these families face the challenge of aligning the desires of increasing numbers of family households. The older the enterprise, the greater the number of generations involved. 

With each succeeding generation, more effort is needed to maintain family ties. Cousins are raised in separate households, perhaps located far from each other. Each household has its own interests and values. Furthermore, later-generation families are often the stewards of not one but several enterprises. Because of these complexities, family gatherings must be organized with intention and agendas.

Family governance begins with the family making a commitment to get together regularly. A gathering of the full family is called a family assembly. Most (89%) of our 113 families hold a regular family assembly. Of these, about three-quarters (74%) meet annually, and 17% gather every other year. Even families without a family council realize the merits of bringing the whole family together. More than half (56%) of the 320 people who responded to our survey said they regularly convene a full family assembly.

Getting people to attend the assembly is a continual challenge. While family members have good intentions, it is hard to clear the schedule and attend a meeting lasting several days, often at a location far from home. Despite such logistical difficulties, the assemblies are well attended. Of our core 113 families, 75% report that three-fourths or more of their family members attended the last assembly, and another 21% saw a majority of family members present.

The 113 families realize they must provide incentives and assistance to encourage people to get together. Almost all assemblies are paid for by shared family funds, rather than by individuals. More than half of these families (56%) also compensate family members for travel to family gatherings. Young adults have particular challenges: young children and lack of available cash. To overcome this difficulty, 48% of the families report that they pay for babysitting during meetings.

Whole-family assemblies are more than social gatherings. They combine fun, education, quality family time and business meetings. They offer family members of each generation a place to get to know each other, strengthen their bonds and catch up on what’s happening in their lives, in addition to conducting family business.

Families reported many activities taking place at the family assembly:

Family education. One of the most important shared family activities is an educational program for younger family members. Given their wealth and resources — which might include not just a business, but also a foundation, investments, a family office and real estate — family members who will inherit ownership have a responsibility to be stewards of the wealth. The families want to teach responsible behavior to their children. They must learn things that are not taught in school.

Nearly half (48%) of the families report having a formal family education program. Of these families, 58% have separate programs for different age groups. Families offered many examples of topics covered in these programs (see accompanying list).

The families also encourage young family members to attend business programs in the community and at business schools. They offer support for education in degree and non-degree executive education programs. The families value education, and they want an educated rising generation to sustain their family and business focus.

Family communication networks
Assemblies and other family gatherings strengthen bonds among family members and develop shared interests. However, families also must sustain and build on these relationships and activities by staying in communication between meetings. Many families have created family portals and social media connections. These personal networks offer privacy and security for confidential family sharing, as well as informal and personal channels for families to keep in touch and move activities forward.

• 41% of the 113 families have an intranet or dedicated family web portal.
• 31% have a print or electronic family newsletter.

The larger the family, the more communication tools they use regularly:

One anomaly in this data is that the largest families appear to be less likely to use these tools. It may be that larger families have more difficulty creating shared commitment and deep personal bonds. They may find it more effective to conduct family communication through liaisons who represent branches or geographic regions.

Some families hold generational or shared-interest meetings, which bring together members of each generation with common concerns or talents. These meetings can be an exciting and meaningful bonding, learning and planning opportunity for young family members. For example, in one family, the third generation meets monthly for educational programs contracted through a local non-profit organization.

The family council
When a second- or third-generation family has expanded to contain more family members than can sit around a table, someone must coordinate activities. In the early years of a business when the family is smaller, the founding generation or family business leaders take charge of these tasks by default. When there is a larger stakeholder group, overseeing family ownership of the business becomes more complex, and a team of people is needed to manage the workload. Hence, a multigenerational family enterprise creates what is commonly known as a family council. The council is the executive group that coordinates activities such as organizing the family gathering, keeping people in touch, and developing family education and philanthropy.

In addition to organizing activities, the family council is responsible for governance, such as setting policies to manage complexity (like the family employment policy) and creating the family constitution. Many families have a board of directors and a governance structure for their business. But the desire of the family to strengthen relationships; celebrate the family legacy; and develop skills, knowledge and commitment for the future means they must engage in family activities that lie outside the business (even though some of them have an impact on the business). The business structures and the business leader, who faces many other challenges, cannot take on these tasks. So we see families creating the family council as a parallel structure to the business: a family organization that takes on the task of organizing, growing and developing the family.

The council does not operate like a business board. While the business organization has strict rules for decision rights, the family is a voluntary organization. Family members have to decide to be part of it, and the organization of the council reflects this voluntary nature. The council often decides by consensus and is by nature a collaborative organization. When policies and rules are established, the family must be part of the decision, or family members simply will not abide by them. Creating a family council reflects a move by the family to a collaborative, engaged and democratic structure. These collaborative values often influence business governance.

A family council represents all members of the family, not just the elders or owners. It’s important for families to make sure council members reach out to all stakeholder groups that make up the family, such as younger generations and family branches. Councils also face the challenge of integrating newly married-in family members into the family and encouraging their new energy and ideas, so that these newcomers feel they are really part of the family (and therefore want to attend the gatherings and bring their children).

Selecting council members. Family members realize that council membership should not be honorary; an effective council requires real work.

Families want their council to represent the family in all its diversity. When a family is small, the whole family can serve on the council. But by the second generation, the family is often identified by second-generation family branches. Branches often represent shared ownership entities like trusts, so there is a natural tendency to select members to represent each branch. More than two-thirds (68%) of the councils in our survey utilize branch representation.

Some councils consist only of the family owners. But as a larger third generation emerges, the council often includes younger members (who may not yet be owners) and married-in family members. To ensure that new generations and new ideas are included, 42% of councils have term limits.

Each council develops its own system for selecting council members, one that reflects the values and dynamics of the family. They may use more than one system for selection:

Here are some responses to this question:

• “Each family branch assigns two family members. Some are voted on and others assigned. We also appoint a member of the board of directors, which rotates.”

• “One family member from each of the original six families (of six brothers) serves on the council. The family member is chosen by the members of that individual family in a manner which that particular family decides. The family council is renewed on a yearly basis.”

• “Candidates have a prerequisite of having attended a particular family business governance seminar. Those qualified are identified by the current family council. The number of open slots and the number of people willing to serve has matched rather well so far. Members who have previously served can serve again if we do not have sufficient prospects who have never served. The current council would use its judgment on prioritizing which prospective members to invite first. The chair reaches out to the prospects and works her way down the list to fill the required number.”

Because organizing family activities is a lot of work, councils tend to meet frequently:

Many councils have some meetings by phone or online conferencing, and others in person. Other councils meet when issues or projects are pending. Larger councils delegate committees or task forces, which may include family members outside the council. For example, there may be committees focusing on philanthropy, next-generation education, planning the family assembly or managing family vacation properties.

Inclusion of in-laws. Many families take an inclusive approach to council membership. In our survey, 62% of families permit married-in family members to serve on the family council. By contrast, only 29% allow married-in family members to become owners of the family business.

Budget
Families face the challenges of funding and compensation to ensure the council is effective. Families that recognize the value of family governance understand that they must allocate resources to make it successful. Larger and more dispersed families require higher family council and governance costs:

In the early years of a family council, the council chair is generally not compensated. But as the amount of labor involved becomes clear, the issue of value and fairness comes up. The council chair works for many hours on “family business,” taking away from family or work time. The chair then feels taken advantage of or expresses a desire to resign from the role. Families come to see that compensation is needed as an acknowledgment of the value they place on family governance and their respect for those who perform this work.

Of the 113 families in our sample, nearly a third (31%) compensate family council chairs. One-fifth pay up to $3,000 annually, 26% provide between $3,001 and $10,000 per year and 31% offer more than $10,000 in annual compensation. (One-fifth of respondents said they don’t know how much the council chair is paid, and 3% said travel reimbursement is the only compensation offered.)

Most (77%) families reimburse council members for travel to council meetings. Some also compensate members who must miss work to attend a council meeting, and 38% report that they schedule meetings to avoid work conflicts. 
Some also compensate council members. More than a quarter (28%) pay up to $3,000 per year, 12% provide between $3,001 and $10,000, and 10% pay more than $10,000.

The owners council
The complexities of a larger family can result in a desire to address issues related to ownership of the business in a forum that is separate from a family council (which deals with issues relevant to the broader family). The owners council provides a setting where shareholders can express their values, intentions and concerns with the goal of communicating with one voice to the business board. The forum is bi-directional: The board turns to the owners council when it needs direction from the shareholder base (for example, regarding risk tolerance) or when important information must be communicated to the family.

Of our 113 families, 28% have an owners council. Older family enterprises are more likely to have established this governance body:

Family constitutions
A family constitution (also called a protocol or charter) is a document that codifies family governance. The constitution combines various policies and agreements into a single document that is subscribed to by all family members. When a person marries into the family or reaches a defined age (often anywhere from age 16 to age 25), they are asked to read and agree to the document.

Unlike a shareholder or operating agreement, a family constitution is not a legal document, although families consider it to be morally binding. Many constitutions include the values and mission of the family, its legacy and history, and details about how family assemblies, councils, foundations and ownership groups work.
The majority (61%) of survey respondents with a family council also have a family constitution. Of this group:
• 29% have had a constitution for more than 10 years
• 25% for six to 10 years
• 23% for two to five years
• 23% for less than two years

The family constitution is not a static entity. Most (71%) families with a constitution have had occasion to revise it.
We asked the families to describe the contents of their constitutions (see box on page 61). Their responses show that these documents are very diverse, containing many sections and considerable detail.

Final reflections
The practice of forming a family council and harnessing its power to benefit the family enterprise is fairly new. There are many models of how a council can serve as a tool for development of the family and support of the business, and for cultivation of the family’s non-financial “capital.”

Families that have embraced family governance practices tend to be larger, and their enterprises older (beyond the 50-year anniversary). Financial support of the council leadership and funding for family meetings evolves as the “business of the family” grows in size and complexity and as the council matures.

The council and other family activities are described and codified in a family constitution. The constitution also documents the family values as well as policies and guidelines for family governance.

With a mature family council, an annual family assembly and a growing family comes the need to provide a conduit for clear communication between the shareholders and the board, which brings about the formation of an owners council. We see in the data an evolution of governance from organizing a first family meeting to launching an owners council.  

We can make some inferences that financial support for governance, documentation of policies and separating shareholder responsibilities from broader family communication and development are steps families see as effective ways to manage the family enterprise. One of the key questions this survey raises is: How impactful and useful are these practices for families? The answer is found in families’ behavior — in their efforts to learn together and provide opportunities for the personal and professional development of their rising generation family members; in their philanthropic activities and work to improve their communities; and, ultimately, in their ability to stay together as a family.

This survey offers a picture of how business families practice family governance. It will help a family that has a family council or wants to develop one to understand the terrain ahead and benchmark what they have done and what they might do as they develop. We invite families to share their learning and let us know what they are doing so that we can periodically update these findings and add to our knowledge of family governance.                                                                 

Dennis T. Jaffe, Ph.D., is an adviser to families focusing on family business, governance, wealth and philanthropy. He leads Wise Counsel Research’s “100-Year Families” study. Peter Begalla is Family Business Magazine’s conference chairman and an adviser to business families. Jane Flanagan is director of family office consulting at Northern Trust.

DEFINITIONS

A glossary of terms used in this report.

Family assembly: A formal gathering of family members to discuss business and family issues. This meeting, usually held once or twice a year, is generally open to all members of the extended family.

Family constitution: A set of documents that record the family’s values, hopes and goals as well as a framework for how to achieve them. The constitution provides guidance on the activities of the family, the business, the enterprise, the family office and more.

Family council: A formal governing body that represents the family. It makes decisions on issues that overlap the family and the business and makes recommendations on behalf of the family to the board.

Family enterprise: The various businesses and shared investments, including real estate, owned jointly by family members. A family usually begins with a single legacy business and then, over generations, diversifies into other investments, often selling their family business.

Family governance: Agreements and shared activities that organize the family to remain aligned in support of their values, ventures and investments through multiple generations.

Family office: A private wealth management advisory firm that serves ultra-high-net-worth families. A single-family office serves one family. Multifamily offices serve multiple families. Family offices can also manage non-financial issues, such as travel and household arrangements.

Owners council: Shareholders of the family business (or a representative group of shareholders) who meet to discuss their vision and goals for the enterprise and relay that information to the board with one voice.

TOPICS COVERED IN FAMILY EDUCATION PROGRAMS

Business Topics:
Branding, markets
Business operations
Business strategy: markets, SWOT analysis, risk, manufacturing
Compliance in digital era
Digital awareness
Entrepreneurship
Family and business history
Information about business operations
Meetings with executives of the family business
Talent management

Family Business Governance, Organization:
Buy-sell agreements
Board responsibilities and governance structure and responsibilities
Reading the annual financial report
Trust and estate education

Financial Topics:
Accounting
Financial well-being
Investing; asset classes; risk; environmental, social and
  governance (ESG) issues
Reading and evaluating financial statements

Professional Skills Development:
Communication skills
Leadership development
Managing transition
Personal development
Philanthropy and social responsibility

SECTIONS INCLUDED IN FAMILY CONSTITUTIONS

Basic Principles/Values/Legacy:
Definition of family
Family history and legacy
Family philosophy
Founder’s values
Shared values, mission and vision held by family and company or enterprises

Behavior/Responsibilities:
Code of conduct
Confidentiality
Social media policy
Use of family vacation property

Family Governance:
Family assembly
Family council
Council member elections
Chair tenure, mandate, term limits
Family roles and participation
Resolving disputes and conflict
Amending constitution
Financial Policies:
Dividend policy
Funds for family support
Entrepreneurship
Employment and other policies
Education policies
Personal loans

Next Generation:
Education policies
Information access
Next generation meetings

Philanthropy:
Governance
Mission

Wealth and Ownership Policies:
Board composition
Board director elections
Voter share restrictions, transfer, sale

Copyright 2020 by Family Business Magazine. This article may not be posted online or reproduced in any form, including photocopy, without permission from the publisher. For reprint information, contact bwenger@familybusinessmagazine.com.     

Crescent Electric Supply of East Dubuque, Ill., was founded in 1919 by Titus B. Schmid. The Schmid family is now in its fifth generation. At the time of the company’s centennial celebration last year, there were 128 family members in seven branches. The Schmid Family Council was established in 2005.

Jensen Precast, based in Sparks, Nev., manufactures precast concrete products. Don Jensen founded the business in 1968. The 14-member Jensen family, now in its third generation, established a family council in November 2014.

Kathy Munson, a third-generation member of the Schmid family, and Jill Jensen, a second-generation member of the Jensen family, chair their respective family councils. Though their roles are similar, their tasks differ. Munson is working to sustain the momentum of her family’s well-established council, while Jensen is focusing on family communication now that key family documents have been created.

We asked Munson and Jensen: What are your family council’s current challenges?

Kathy Munson, Crescent Electric Supply:

“One of [the challenges] is getting the next generation involved. There is a lot of interest, but for young people to find the time to participate in meetings or lead certain initiatives is a bit of a challenge. We’re trying to find ways to engage them in the time that they have to offer.

“The other one is [identifying successors for] family members on the business board — finding the people who have the desire and the capabilities. You need a good business background. We have several that are [qualified], but they have kids now. There’s a lot of attention that they need to give to other things in their lives.

“Those are two challenges we can meet — they’re not insurmountable at all — but they’re right in front of us at the moment.

“We’re moving into a new era for philanthropic activities, and I’m not sure where it’s going to go. We have a new chairman of the philanthropy committee within the family council, and she’s just starting to gather information. What have we all been doing [individually]? We already do some things together, but do we want to do more?”

Jill Jensen, Jensen Precast:

“We thought at the beginning it would be a lot of work, and it was. But there’s also a fair amount of ongoing work. The documents themselves are sort of living and breathing, so we always have to be looking at them and redefining them and talking about whether something has changed or not.

“Where we needed help was clarifying our roles and responsibilities. We did some exercises early on, and our consultant would ask, ‘What hat are you wearing right now?’ Depending on the decision that was made, we had to [consider], are we wearing our family council hat, are we wearing our shareholder’s hat, are we wearing our board hat? And because all five of us [family council members] are still working in the business, are we wearing our management hat, our employee hat? That still is something that we have to pay attention do with every decision made.

“I think our biggest success has been responding with one voice to the needs of the business. And even though we may not agree on everything, we do respect the decisions that are made. It’s OK to disagree in a family meeting with each other, but it’s not OK to go out into the business and disagree outside of the family council.”

Copyright 2020 by Family Business Magazine. This article may not be posted online or reproduced in any form, including photocopy, without permission from the publisher. For reprint information, contact bwenger@familybusinessmagazine.com.    

E. Ritter & Company, a Marked Tree, Ark.-based portfolio company currently focused on agriculture and telecommunications, elects its family council members. The Ritter Family Council consists of three branch representatives — one chosen from each of the three family branches — and four at-large members, elected by the whole family. Council service, originally limited to blood descendants, now is open to married-ins.

IDEAL Industries Inc., based in Syca­more, Ill., is a diversified global business that designs and manufactures products and tools for multiple industries. The IDEAL Family Council does not hold elections — anyone who wants to serve on the council is welcome. IDEAL has taken this open-membership structure to the extreme: A non-family member serves as chair of the family council.

We asked Katy Wilder Schaaf, chair of the Ritter Family Council, and Meghan Juday, the former chair of the IDEAL Family Council who will become IDEAL Industries’ chairman on Feb. 1, to explain how their council membership policies evolved.

Meghan Juday, G4, IDEAL Industries:

“When the fourth generation took over some level of leadership and influence [in] the family council, that’s when we really started looking at our attendance policy and inclusive values more strategically.

“[The family council has] a relaxed policy. Anybody can sit in on a family council meeting, but if you want to be a member, all you have to do is commit to being a member. We’re happy to have you — we want the voices, we want the perspectives and our goal is to represent the whole family’s interests at all times. The more diversity we have in the room, the better off we are as an organization.

“Even if there were somebody there from each branch, there is no branch representation because the responsibility of the family council is to represent the whole family’s interests at all times.

“One of our biggest drivers to finally drop the last vestige of branch representation was when my father, Dave, was talking about retiring as chairman, and [it was clear] that we were not going to replace him with another family chairman. That [focused] our conversation around, what responsibilities do family directors have, now that we no longer have a family chairman?

“That forced us to look at, how do we get away from branch representation and start talking about merit-based appointments for developing highly qualified family directors and family leaders? That was really the final nail in the coffin to branch representation. Because you’re not going to get the most qualified, you’re going to get the most qualified in any given branch, which isn’t necessarily the best person for the role.

“For those positions where we require certain qualifications, we have resources and development opportunities, and we have leadership positions inside family governance where [family members can] grow their skills. That was the other complement. You can’t say, ‘We’re going from branch representation to merit’ and then just expect people to line up who are fully qualified. That decision to go to merit-based appointment was a huge driver for our development and education program.”

Katy Wilder Schaaf, G5, E. Ritter & Company:

“We developed our family council a little over 10 years ago. It was kind of a new concept for us, and our family had some hesitations. I think that branch representation initially really helped to sell the idea of a family council.

“Branch representation was a way to reassure the family that there wasn’t going to be this body of people who spoke for the family but didn’t represent at least some of the views, or understand some of the views, of the different branches. We have one very large branch and two much smaller branches.

“One of the pros of branch representation is that in a larger family, it’s less likely for one person to have deep, connected relationships with the entire family. When we want to gather the voices of family members we might not be in touch with, the branch representative typically is the point person.

“I think that the con of branch representation is [that it] assumes division where, I think, at least in our later generations, there isn’t necessarily that mindset anymore.

“In our family, as we become more geographically dispersed, the idea that one cousin would have significantly different views than another cousin because of what branch they come from is just not something that is on the table very often. It feels like there’s probably more differences in views amongst generations than amongst branches.”

A family council with a non-family chair

Mary Nicoletti joined IDEAL Industries as family governance manager in 2017. A year later, she was named family council chair.

Nicoletti is not a member of the family that owns IDEAL. Before she began working with the family, she served as director of the Initiative for Family Business and Entrepreneurship at St. Joseph’s University in Philadelphia. Prior to that, she was senior program coordinator at the University at Buffalo’s Center for Entrepreneurial Leadership.

“I think one of the biggest advantages [of the IDEAL role] is that I have a very different perspective,” Nicoletti says. “Though I work with the family, I’m not an active part of the family dynamics. That allows me to observe family dynamics and get a better perspective on risk and, I would say, opportunities” to bolster family development and education efforts.

Why would the 50-member IDEAL family want a non-family member as chair of their council? “We’ve come up with a really good analogy: We are composers of really complex music which we cannot play ourselves,” says fourth-generation member Meghan Juday, former family council chair.

“We have done some very meaningful work, but to run the governance process that we believe we need to run a really strong development and education program — to manage all the logistics, the meetings, the notes, the minutes, everything — is a huge job.”

In addition, Juday notes, “Part of our commitment to development is that if somebody’s working towards a leadership role and they become qualified, they are not stuck in a lifetime of limit in some other role because we can’t fill it [with another family member].”

When Juday served as family council chair, she was working to become qualified for the role of board chairman. In 2018, she was named non-executive vice chair of the board. To make time for the new responsibilities, she needed to relinquish her family council role.

No one in the family had the right combination of skills, desire and availability to take the job. “It’s rewarding, but it’s difficult, because [it involves] a lot of psychology, a lot of organization, and a lot of working with people very closely about something that’s really emotional,” Juday says.

Nicoletti has established a system for measuring family engagement and adjusting council plans based on those metrics. “I think she really took it to another level, which has been super exciting for us,” Juday says.

The company covers Nicoletti’s salary as well as that of the non-family member who succeeded her as family governance manager. The return on this investment in shareholder relations has been “very significant,” according to Juday.

“The whole point is to ensure that the family is not only getting a financial return but also an emotional return for being part of the family business.”

Copyright 2020 by Family Business Magazine. This article may not be posted online or reproduced in any form, including photocopy, without permission from the publisher. For reprint information, contact bwenger@familybusinessmagazine.com.

Developing a family council checks a lot of boxes for a growing multigenerational family business. A family council provides a mechanism to engage and educate family members in a setting that includes positive social bonding time. Councils are a mechanism to define and address the “business of the family,” reduce conflict and promote positive social experiences associated with the business. They also encourage family interaction across branches and generations.

However, once a council is in place, deciding how to best plan a council meeting can be a complex problem. Council leaders must ensure meetings are regarded as a good use of time and productive in order to retain buy-in from family members with busy lives. Our family business, E. Ritter & Company, was founded in Marked Tree, Ark., in 1886 and now spans six generations. E. Ritter & Company is the parent to Ritter Agribusiness, a farm management provider, and Ritter Communications, which provides telecommunications products and services in Arkansas, Tennessee and Missouri. The Ritter Family Council (RFC) represents three generations of family members.

As is true of many other family businesses, the need for a family council evolved as the family moved out of employment/management positions to mostly shareholder positions. The family council, established in 2008, represented an effort to keep this large, geographically dispersed group connected and educated about the business. The RFC grappled with questions that included: “What should we be accomplishing?” “How should we structure our meetings?” and “How can we best serve our family and its business?”

Each family has its own process to address the “business of the family.” The RFC used a family charter as a starting point. This document established the family council and required the family to engage in a process of collaboratively defining its mission and values. Our family charter was first drafted by a committee of family members (facilitated by a consultant) and later approved by the larger family.

In the early years of development, the RFC created a family employment policy, provided content for the yearly family meeting and worked on a plan to engage the young adults, who were largely disengaged from the company as few were actual owners.

As the family has continued to grow and evolve, the RFC has developed additional documents. This work was possible, in part, because of the advice of invaluable consultants as well as the development of two paid positions. One paid family position, the lead family director on the Ritter board, is also a liaison to the family council. The other role — my position — is to facilitate the needs of the family council: helping to plan social events and family events (such as the annual meeting, summits and family council meetings) and developing educational events for the family.

The RFC now has a two-year strategic plan that is updated annually based on feedback from our self-evaluation.

We have a budget that is reviewed and updated quarterly. Funds allocated in the budget are spent on programs such as social events in conjunction with the annual shareholder meeting, family council travel/stipend expenses, formal family education opportunities (e.g., conference attendance) and next-generation projects.

The RFC documents are described below, along with some pointers for families interested in developing versions that fit their unique needs and circumstances.

Family charter/constitution

The family charter or constitution is often one of the first documents a council creates. It defines the mission and values of the family who are in business together. While not a legal document, the charter can provide official guidance for a number of family meetings and activities. Subjects to address include:

• Requirements for participation on the family council (e.g., age, shareholder status, blood relative vs. married-in).
• Duties of a family council member (e.g., participation in meetings or conference calls, further education, attendance at family meetings).
• Leadership roles in the family council (e.g., president, vice president, secretary).
• Family meetings (e.g., frequency, who may attend).
• Specifics of how the council is funded.
• Specifics of how this document may be amended.

This is a living document. Create a process to review and revise the charter on a regular basis.

Attend to the language used. General language allows for flexibility and avoids the need for frequent amendments to the document. Specific language communicates unchanging certainties of a family.

Job descriptions

Many family councils consist of family volunteers. Other families choose to pay a family member for investing his or her time to support the council. Prior to creating a paid role, a council should develop a job description detailing general traits required for the job and specific job functions. In addition to defining the tasks that are needed to facilitate the family council, consider the following elements when writing a job description: educational requirements, sliding scale of compensation, and employee vs. contractor status.

Convene a small group to write job descriptions. If you have a large family council, it may be most efficient to use a task force to draft a job description; the full council would then review and approve the draft.

Self-evaluation

Embedding a regular “checkup” into the council framework provides family members with a mechanism for reflecting on its strengths and weaknesses. Self-evaluations can be more effective if they are accompanied by a list of the council’s recent accomplishments. Self-evaluations can provide helpful feedback on which accomplishments have best moved the family forward and can help the council set future goals. The process also provides family members with an opportunity to state their concerns about such matters as reimbursement for their time or the setting and structure of meetings.

Decide whether the feedback should be anonymous. Anonymous feedback can encourage openness. On the other hand, including names with the feedback can facilitate a better understanding of specific family members’ concerns.

Use an online survey tool. Make it easy for family members to complete the surveys by using a free online tool.

Strategic plan

The “business of the family” needs a strategic plan as much as the “business of the business” does. Creating a one- to five-year plan is one of the most effective ways to build purpose and intentionality into a family meeting.

Your family council strategic plan should include tasks that are accomplished at regular intervals and new council goals. Strategic plan items might include planning for a family retreat or meeting, discussing educational opportunities for the family, reviewing the council charter, creating a task force to plan a social event, and planning programs for members of the youngest generation. Use feedback from the self-evaluation to bolster a strategic plan. When family council members see their feedback incorporated into the council agenda, buy-in is often increased and the purpose is reinforced.

Include your family mission and values. Your family spent a long time discussing the family mission and values. Make sure this guidance is incorporated into the task-oriented work of the council. Consider including these at the top of the strategic plan to ensure the tasks of the council are consistent with the already-defined goals of the family.

Budget

A budget provides a process for a family council to better define specific activities, how they are funded and how much the family is willing to invest in a council. A budget may include:

• Travel costs for family council members.
• Family council honorarium.
• Funding to attend outside conferences.
• Funding for family social events associated with the business (e.g., a family meeting or retreat).

Decide who funds the council. A starting point of the budget is the decision about how the council will be funded. Will the funds come from the business, will the money be subtracted from dividends or will family members be assessed?

Include the business in the process. Developing and maintaining a budget often requires family collaboration with the business. Decide who will track receipts and enter updated numbers for the budget.

Policies

The idea of developing policies may seem too formal for a family business. However, as the business extends beyond the founding generation and family members begin to spread out geographically, policies can help minimize conflict. The process of creating family policies allows the council to discuss areas of disagreement before an issue becomes personal.

One of the most common family policies is a family employment policy (covering whether family members should be required to work outside the family business before joining and procedures for evaluating their performance and determining their salaries). Another example of a policy that addresses an area of potential conflict is one covering eligibility and nominating procedures for family members who wish to serve on the board of directors.

Determine if family-wide consensus is necessary. While the family council is often an elected body that has been chosen to represent the family, policies can be controversial. Decide if it is important for a policy drafted by the family council to be presented to and voted on by the whole family.

Benefits of the process

While family council objectives stem from each family’s unique culture, the process of developing family documents adds purpose to family council meetings. Collaboratively considering mission and values, working out resolutions to situations that can create discord and creating a self-review process can strengthen relationships and center the focus of discussions on “the business of the family.”

We hope the tools that have served us well will promote effective practices and maximize engagement among other families who have struggled with similar issues. FB

Katy Wilder Schaaf, Ph.D., is a fifth-generation family owner of E. Ritter & Company who works with the Ritter Family Council on a part-time basis. Outside of her family business work, she is a clinical psychologist whose work focuses on brain injury.

Port Blakely, in its fifth generation of family ownership, grows and markets renewable forest products around the globe. The company, acquired by the Eddy family in 1903, is based in Seattle.

Today there are approximately 140 family members, about 85 of whom are company shareholders. In 1999-2000, the family convened a task force to draft a family employment policy. After studying up on family governance, the task force expanded its mission to developing a governance structure and eventually evolved into a provisional family council. In 2002, the Eddy Family Council was formally established. Fourth-generation member René Ancinas was the first family council president.

Ancinas, 52, left the family council in 2005, when he joined Port Blakely. He became COO in 2008 and CEO in 2010; in 2015, he was named chairman and CEO.

Eddy Family Council members are elected to three-year terms and may serve a second term. Each year, three members leave and are replaced by three new members. Ancinas attends family council meetings but does not vote. Port Blakely’s director of human resources attends council meetings to provide coaching and support.

The current president of the Eddy Family Council is Summer Worden, 42, a married-in fourth-generation member. Worden is founder and CEO of Filly Intelligence LLC, a private technology and security firm based in Houston. She has been a council member for three years and is in the second year of her presidency.

We asked Ancinas and Worden: What are the elements of a good working relationship between the business leader and the head of the family council?

René Ancinas, Chairman & CEO, Port Blakely:

“The CEO needs to be able to adapt to what each family council president brings to the table, and maybe even try to seek out what that is, and help them focus on that. I would say there’s a certain amount of coaching, but you can’t coach too much, because there has to be a certain level of independence.

“There has to be a level of trust, so that you can be honest and open. So, for example, the family council president needs to feel that the CEO supports them. They might be thinking, ‘I’m not sure if this is something I should deal with, or if I should hand this over to the CEO.’ They need to feel confident and trusting that they can reach the CEO and say, I’ve got this feedback, and I’m not quite sure what to do with it,’ and that you can work it out.

“Some of our family council presidents have been more driven to task lists and checkboxes, and they forget that there’s also an emotional side to bringing the family along. So you have to coach them to not push too hard. And then, on the other hand, we’ve had family council presidents who were very attuned [to] feelings within the family, but might have needed a little bit more cajoling to be clear about what their priorities were for the year. The ability of a family council president to be coachable and open to feedback, and the ability of the CEO and the HR person to [provide] that and adapt to that person’s style, is really important.

“From a CEO’s [perspective], you’re always trying to figure out, ‘Where should I step in, and where should I not?’ Because you don’t want to micromanage. I would say that it’s very rare that I have to step into a very specific family or personal dynamic.

“I think every company has to go through their own journey of figuring out how this all works. And you don’t just do it and it’s done. You have to keep evolving.”

Summer Worden, President, Eddy Family Council:

“We would not be nearly as effective if the two of us didn’t talk and really make a concerted effort to be on the same sheet of music. Certainly we wouldn’t be as productive. It’s essential that we have a close and unified relationship.

“We have established times for open discussion. Our lives are so busy that if we didn’t have those times specifically set aside, then we probably would miss some of those important [opportunities] to have conversations.
“I want to be meeting the expectations that he has for the family council, and also understand our boundaries — what isn’t within our roles and responsibilities. That’s often a slippery slope, or could be not a very clear line. Understanding those expectations and strategy objectives helps us do our job better.

“One thing that we’ve really focused on doing over the past couple years is to systematize the way that we operate on the council. If we are able to more concretely lay down some of these systems, then regardless of who is rotating on or off, hopefully we can rely on the system to be in place and be a point of consistency and help to alleviate a little bit of chaos, so to speak. And another way that we’ve really tried to reinforce these systems is to deepen our relationship with the director of HR and her staff. She is there year after year after year, and that can serve as a point of continuity for us.

“René is an exceptional example of a CEO. His emotional IQ is very high. He’s constantly seeking feedback. He asks, ‘How is my participation? I don’t want to commandeer the meeting.’ At the end of every [family council] meeting, we give [each other] feedback. That’s very helpful.”

Copyright 2018 by Family Business Magazine. This article may not be posted online or reproduced in any form, including photocopy, without permission from the publisher. For reprint information, contact bwenger@familybusinessmagazine.com.
 

Successful family council meetings are often elusive. Picture a family council meeting where the CEO and patriarch sit frustrated, waiting for several members to show. Some members are distracted. Others are having side conversations. The patriarch checks his watch. The meeting was supposed to start seven minutes ago. He rereads the agenda as stragglers trickle in slowly. The meeting finally begins once the youngest son walks in, 13 minutes late.

The council discusses its first few agenda items. When the recent family reunion comes up, tensions emerge. The eldest son is quite vocal about how the reunion went—or rather, how it should have gone. The youngest son disagrees, obviously feeling just as passionate. The patriarch, still frustrated by the group's tardiness, refuses to interject and lets them continue to hash it out. The eldest son's wife sits uncomfortably. She and other family members want to move on and discuss other agenda items. She wonders to herself, "Why are these meetings so difficult?" It's obvious this meeting was derailed by a "hot button" topic. Now the rest of the council can't get any momentum. They've lost the opportunity to effectively communicate with one another.

This is an example of a family council that would greatly benefit from a well-facilitated process of communication, engagement and decision making.

Benefits of a well-facilitated meeting

When effective preparation and facilitation become ingrained in family council practices and culture, the results reinforce the family's core values and help sustain the vision and mission of the family enterprise. In other words, good meetings make people feel good about the people who are there and what is discussed. Participants feel engaged and have a positive outlook on the future.

Well-facilitated meetings are more fiscally responsible because they make efficient use of people's time and promote good decision making. When the family grows and council members represent multiple generations and branches, order and structure become even more important. The group's divergent interests, the increased complexity of the issues they must confront and the mix of personalities can stifle progress.

Facilitation is not necessarily the same as managing a meeting. A skilled facilitator attends to the level of trust and safety within the group as well as the mechanics of getting things done. The facilitator sets the tone: "We care about you and what you have to say, and this meeting will be conducted in a way that will provide the environment and structure so both goals are achieved." The facilitator is the guardian of those principles: order and safety. After all, family dynamics can get rather messy at times.

Intersection of family and business systems

A family discussion around the dinner table generally feels different from a management meeting around a conference table. The family enterprise is where these two constructs intersect and, in some situations, collide.

The previous scenario represents a dynamic that creates frustration and disengagement from the council. An argument arose between two brothers who had different opinions about a family reunion event. The patriarch responded passively and the daughter-in-law, eager to move on to other topics, was left feeling uncomfortable and discouraged about the meeting. If not addressed through careful planning and skillful facilitation, these types of meeting dynamics can create a division between the G2 brothers and trickle down to their G3 children, threatening the sustainability of the family enterprise. Unresolved conflicts between and within G1 and G2 can manifest in unhealthy ways into G3, G4 and beyond. Sometimes, the pattern continues until a "transitional person"—perhaps a grandchild or great-grandchild—refuses to pass it down. These next-generation family leaders emerge to reshape the family legacy with courage and conviction.

Within family systems, there are deeper psychological patterns that influence behavior in council meetings. This is especially true when council members are not coached in navigating business meetings that involve difficult decision making and dynamic tension. The unintended consequence of simply inserting family members into councils without training or orientation may be unproductive council meetings.

Bringing managerial fundamentals such as "meeting management" and decision making into the family council can positively influence productivity and outcomes. The chair of the council must model emotional objectivity toward all council members and commit to honor absent family members (even if they have created tension in the family) while practicing effective meeting management basics. This is a weighty responsibility, but training and outside support can lighten the burden.

Emotional intelligence in the family council

Family councils should consider providing some foundational training in "emotional intelligence" to develop group guidelines and behavioral norms. Emotional intelligence refers to the capacity to be aware of, control and express one's emotions, and to handle interpersonal relationships effectively and empathetically. Emotional intelligence is the key to success in both the personal and professional realms. If trust is the barometer of a healthy relationship, emotional intelligence is the mercury in the barometer.

Eventually, conflict and tensions will emerge in any group that must navigate issues of generational wealth and make decisions that affect future generations. A facilitator or meeting chair with high emotional intelligence is capable of disarming tensions and bringing important issues to the table.

We tend to fear strong emotions, and we worry that what we say will hurt feelings, diminish trust and create divisions among family members or entire family branches. However, conflict avoidance will not resolve the family's issues and in fact will likely perpetuate them. Addressing disagreements effectively will free the next generation from unhealthy patterns.

A skilled facilitator does not shy away from emotions, but instead artfully and empathically interacts with family council members to reflect, translate, probe and at times set boundaries so everyone feels safe when strong feelings emerge. "When emotions like fear, anger and desperation become the pervading lens through which we see a situation, we see only what supports that emotion," writes Larry Dressler in his book Standing in the Fire. "In this low state of self-awareness, we are like an artist who paints with only one color."

We all need "psychological air" when feelings well up inside us. For example, a council member might express strong emotions through nonverbal behavior. Simple reflective statements can help draw that person out and constructively guide his or her comments. The facilitator might say, "I can tell you have some strong feelings on this topic; can you briefly describe your concerns?"

Basic facilitation skills

Effective meeting facilitation involves directing traffic at times and faithfully translating participants' behaviors and motives at other times.

For example, consider an overly excited family member who uses generalizations and assumptions when discussing a new volunteer program. Other council members are getting turned off. A faithful translator acknowledges the excitement and good intent behind all the enthusiasm: "I can see how hard you have worked to research this opportunity for the family, and that it is important to you. Let's do a pulse check with the council to see how we might prioritize this in relation to the other programs going on this year. Hang in there, and we can see if there is strong agreement to move forward." A good facilitator can read emotions and intent in a fair and objective way, then summarize to the group so the person feels validated—even if the council ultimately decides to go in a different direction.

One specific technique to foster participation is called "nominal process." The facilitator calls on each person to react to the topic at hand. The facilitator sets the guideline on the front end: "Let's go around the circle and hear from everyone on that topic. We'll go in order and keep our comments concise so we can see where there are themes and gauge the level of agreement." If someone starts to "story-tell," vent or venture outside these guidelines, the facilitator can respectfully but firmly move on to the next person to maintain productive and healthy group dynamics.

A skilled facilitator also models active listening—carefully reflecting both content and feelings as they occur. A good facilitator understands when it's best to focus on what an individual is saying, and when it's more productive to reflect the broader group's interaction and summarize a group theme.

An effective facilitator will also weave in examples of shared values and connect dots on topics. For example, he or she may cite a brief example of a successful outcome from another family council that is relevant to the discussion and reflective of a core family value, such as helping those less fortunate. These intermittent examples or case studies can help the council stay connected to its core purpose and the family values while maintaining some level of objectivity. Otherwise, families may struggle with something I've heard called "terminal uniqueness": the belief that "we are so special or unique that no one outside the family could possibly understand us."

The repeated use of these techniques from meeting to meeting will gradually increase council members' self-awareness and instill healthy communication norms and guidelines, ultimately making the facilitator's job easier.

Internal or external facilitator?

Skilled facilitators emphasize inclusion, build trust and encourage healthy dialogue. Just as in business, these competencies can be developed from within the organization as well as hired from outside. The family council chair should receive training in running effective meetings as well as in developing emotional intelligence so an outside consultant is not required to facilitate every meeting.

In the early stages of family council development, it is often a good idea to engage outside support for facilitation and training. Skilled professionals can also establish an atmosphere of discipline and energy at annual retreats and other high-level meetings, such as strategic planning sessions. The presence of an external facilitator frees up the council chair to participate in the process.

When considering an outside facilitator, it is important to assess whether the person has the skills to help your family council address its issues, and whether he or she has experience working with groups of similar size and complexity to yours. This requires a degree of self-awareness: Are you hiring someone to help with policy development, or is family therapy really what you need?

Skilled facilitation, whether within the family or provided by an external professional, is the vehicle to foster effective communication and decision making. These qualities are the currency of healthy and thriving family councils.

Jeff Strese is Chief Talent and Learning Officer at Tolleson Wealth Management (www.tollesonwealth.com).

Copyright 2017 by Family Business Magazine. This article may not be posted online or reproduced in any form, including photocopy, without permission from the publisher. For reprint information, contact bwenger@familybusinessmagazine.com.

When he was in fifth grade, Will Lyles wrote a paper outlining his future career path in his family's business. Although he didn't end up taking time off to get an MBA, as he had predicted at age 10, his career has largely followed his childhood vision.

Today Will Lyles, 57, is senior vice president of Lyles Diversified Inc., an S corporation that oversees the Lyles family's construction businesses and provides management and administrative services to the family's other holding companies. The broader Lyles Family Enterprise consists of various California businesses and ventures in construction, real estate and agriculture, as well as investment partnerships.

The family is working to establish a family governance system that will see the business and family through a tricky generational transition.

"We're in the early stages of the journey," Will says.

Will's grandfather, Bill Lyles Sr., and grandmother, Elizabeth Lyles, founded a pipeline-building business, originally called W.M. Lyles Co., in the oil fields of Avenal, Calif., in 1945. Today, Lyles Construction Group, now headquartered in Fresno, is California's second-largest contractor specializing in environmental and water treatment plant work.

Construction remains a key part of the business: In 2015, the companies generated construction revenues of $267 million. The construction division has about 150 salaried employees, plus about 500 unionized workers who work on specific projects.

Two members of the second generation work in the business. Gerald Lyles, 74, is senior vice president of Lyles Diversified and president of two LLCs through which the family makes investments, Lyles United and Lyles Investments. Gerald's brother, Bill Lyles, is chairman of the joint company advisory board that oversees all of the family's business enterprises and president of Lyles Diversified.

Along with Will Lyles, two other third-generation members are active in the business: Will's wife, Tami, 53, runs one of the family's construction companies, and Kathy Porter, 51, the daughter of Gerald and Bill Lyles' sister, Marybeth, is shareholder services manager.

Although the ownership structure varies slightly among the three companies, more than 90% of the business is owned by members of the second and third generations. No single person has a majority stake. The companies' salaried employees are also owners through an employee stock ownership plan.

A storied history

Gerald Lyles was 2 when his father founded the company. "By the freshman year of high school, we were working in the fields in the summers with the crews and also doing office work, breaking down the costs of each element of the work," he recalls. He joined one of the company's subsidiaries full-time in 1966, after college and a stint in the Navy. After a few years, he returned to school to get an MBA, then worked in finance for a number of different manufacturing companies outside of the family business.

In 1973, Gerald's brother Bill, who had been working at the company since their father's death in 1965, asked him to return to the family business to help it expand.

"That was a big turning point," Gerald says. When he returned, the company started investing in multifamily housing and development. In the 1980s, Lyles bought its first manufacturing company. In 1987, Lyles became a 50% partner in Pelco, a security camera maker that 20 years later would provide a large cash boost when it was sold. The family has invested the proceeds from the sale primarily in apartment buildings and agriculture.

Now the family is looking to the future, making the transition from the second generation to the third. Family members are also laying a foundation that will allow the fourth generation, and those that follow, to continue steering the family enterprise.

"They are facing some of the classic issues that most family businesses encounter: how to support their ownership goals, how to position themselves as an ownership group to grow the company and add value, and the ever-present challenge of generational transition," says Joshua Nacht, Ph.D., a consultant with The Family Business Consulting Group who has been working with the family.

Will Lyles prepared himself to meet those challenges by following three generations of his family to Purdue University. During the summers, he worked at the family business, laboring on construction crews. He majored in civil engineering with an emphasis on construction—all steps designed to prepare him for a career with the family business.

"I have always loved the construction business," Will says. "To have been born into a family that does something you really enjoy—it's given me opportunities to do things at an earlier age than I would have otherwise."

During summers in high school, Will worked for the company in a variety of capacities, from accounting to pulling up tumbleweeds from the field outside the office. He joined full-time after college as an engineer in training, moving up to project manager, then to division manager and eventually to company president.

Family council formation

The most recent family member to join the business came on board partly to help with the generational transition.

Kathy Porter knew about the business growing up, but her parents pursued their own careers outside the family business, so she did not have the same up-close look at the company as her cousins did. She spent 25 years working in commercial real estate in Los Angeles. In March 2014, she joined the company to provide enhanced shareholder support and communication.

"For a transition to happen 10 years from now, you have to be contemplating it now," Porter says.

It has been a long, slow process.

The Lyles family first realized in the early 1990s that as the family grew with successive generations, they would need a more structured way to keep everyone involved. They formed a nascent family council at that time, but because generational transition was not an immediate concern, its activity gradually tapered off.

About five years ago, Will Lyles realized that the family had both grown and changed—and that it would take some effort to make sure the business transitions were smooth.

"My cousins and I had grown up knowing each other," Will says. "My sisters and cousins have been extremely supportive of my efforts at the company. But they're spread out all over the country, and our kids don't know each other the way we knew each other. If we really wanted to keep what's been created together as a family, we needed to work on it."

The family council was reborn, and this time was stronger.

"As the family and businesses grew, and when we had fourth-generation teenagers, we realized it was time to get more serious about coordinating, educating and engaging the family," says Annarie Lyles, 55, the family council president.

Today the council includes representatives of seven of the 10 third-generation families. The extended Lyles family gathers once a year. "We have started reaching out to Generation 4 to be involved in the family council also," Will says. The council's early goals are to focus on family events and education.

A weeklong event for fourth-generation teenagers was updated. Instead of staying in Fresno, as they had done in the past, they toured various sites in Northern California. This gave the next generation a clearer picture of all the industries the company is involved in, not just construction. They saw one of the company's apartment buildings in San Jose, for example, and visited a tech startup that the company has invested in.

In the summer of 2016, the entire family gathered at Tumbling River Ranch in central Colorado for a week of meetings and family bonding. Activities included whitewater rafting and horseback riding, as well as a video presenting the second generation's hopes for the future of the business and the family. A session on cyber security was presented. The family also broke into generational groups to discuss some governance issues.

"We were introducing [the younger generation] to all the things we do and trying to create excitement about opportunities with the family enterprise," Will says.

The family has developed a family employment policy, recommending though not requiring that family members work outside the business before joining it.

"One of the challenges we have today is, if someone in the family is interested in construction, how do you create a leadership path in a reasonable time?" Will says. "Construction requires a lot of experience. The company's size has grown, as has the complexity of our jobs and our market—as well as the diversity of our company beyond construction."

The family council is looking at potential career paths within the company. Historically, there has been only one path, through construction. "We're recognizing that we have lots of other paths, potentially, but they need to be developed," Will says.

Improving communication

As the family looked for ways to coordinate, it found that communication was a challenge. The third generation is spread out all over the country, and only a few third-generation members work for the company.

Steve Titus, 47, a married-in member of the third generation, researched the use of an intranet portal that would function as the family's communication hub. Titus—whose wife, Jennifer, is Gerald Lyles' daughter—recommended the online platform offered by Trusted Family, a technology firm; the family council accepted Titus's proposal. (Titus also joined the family council around this time.) The Lyles family has been using the Trusted Family platform as a centralized system for family communications for about two years.

The site serves as a secure repository for financial and other documents. The family is also building an education module that explores the history of the business and its accomplishments.

"It has completely changed the way we communicate," Titus says. In the past, family members might leave a meeting of the family council or family assembly full of plans and good intentions, but it was complicated to keep work going. The intranet site makes it easier for family members to keep collaborating on the documents they have started.

Titus, who formerly owned a display design/manufacturing business, saw strategic value in developing a family brand to engage family members and inspire family loyalty.

Titus says one key change was expanding the extended family's view of the business beyond construction. "We're not just talking about the family business—we're talking about the family enterprise," Titus says. "It's social, it's philanthropy, it's the businesses."

The Lyles Family Enterprise brand centers on the family's core values, the key benefits of being a Lyles family member and the family development plan. The family development plan focuses on five main areas: governance, education, family/social activities, philanthropy and entrepreneurship. Core values and benefits are currently under discussion as part of the family development plan process.

The family worked with Nacht to create the family development plan, which includes building their capabilities as a group of owners as well as the transition to the fourth generation. They recognized that each of the five areas is important for their long-term sustainability and for the development of the family as an ownership group, Nacht says.

Nacht calls the Lyles family "a very friendly and open group" that communicates well. "This is a family that genuinely likes to be around each other," he says.

Nacht notes that family members, including those who have pursued careers outside the family business, bring an impressive breadth of education and experience to the ownership group and the family council.

"Most of them have other jobs, but they recognize that they're part of a remarkable business," Nacht says. "They are really willing to put in the time to do the work of the family council."

Will Lyles says the family's short-term plans are to keep working to enact the plans they have made for family governance.

"Five years ago, I felt that I was carrying a lot of the load just by myself," says Will. "Now it is spread across a broad spectrum of the family. It's allowing me to focus a little more on the business as opposed to both the family and the business."

Margaret Steen is a freelance writer based in Los Altos, Calif.

A family retreat at a family-owned ranch

When the Lyles family needed a place for a fun but productive multigenerational retreat to focus on the future of their family business, they turned to another family-owned business: Tumbling River Ranch in central Colorado, 62 miles southwest of Denver.

The ranch has room for 50 to 55 guests per week. Guests stay in individual cabins or in one of two historic lodges, including one that was built in the 1930s by the Coors family.

The Lyles family booked all the rooms in the ranch for their weeklong retreat. The ranch's owners, Megan Dugan, 43, and her husband, Scott Dugan, 45, worked with the Lyles family to accommodate the technology they needed to run their meetings, find a service project for the kids to do and consider the accommodations that would work best for the second-generation family members.

Megan and Scott Dugan are buying the ranch gradually from Megan's parents, Jim and Mary Dale Gordon, who decided in 2000 to retire after having owned the ranch since 1975. Megan and Scott are expected to complete the purchase in 2018.

Megan and her three brothers were raised on the ranch.

"My earliest memories are of being with my dad all the time," Megan says. "We would go on jeep trips with my dad, to the horse pasture with my dad. My parents absolutely stressed that this is a family effort. At 9 years old, we were expected to work like other staff members."

Megan started out helping clean cabins, and by high school she was taking on more leadership roles as a wrangler and a waitress.

"I get the question every week: How did the youngest daughter end up with the ranch?" Megan says. "It was timing—and marrying someone who was so passionate and excited about it."

Megan and her brothers all went to college "ready to find our own identities," she says. She studied speech communications in college with a minor in general business. "My dad made sure I did some accounting courses, which have proven to be very beneficial," Megan says.

Scott Dugan was born and raised in Atlanta. He came to Tumbling Ranch one summer to work because a friend from college was working there. He discovered that "he loves the Western lifestyle," Megan says, and he stayed in Colorado.

Taking over the ranch was intimidating at first, according to Megan.

"We were very young, and we were buying into a business that had year-round employees that were much older than us and had worked for my parents," Megan says. "Our strategy was to just keep it going."

Still, the Dugans had ideas for expanding the ranch's programs. They added a nanny program, guided hikes and shooting sports.

Just as Megan's parents did, she and Scott are raising their three children, ages 14, 12 and 7, on the ranch. "People constantly ask me, 'Will your kids take over?' " Megan says. "We just go season to season." — M.S.

Copyright 2017 by Family Business Magazine. This article may not be posted online or reproduced in any form, including photocopy, without permission from the publisher. For reprint information, contact bwenger@familybusinessmagazine.com.
 

We have been working on enhancing the role and responsibilities of our owners' council (family council), along with identifying the set of skills required to serve as a council member. We hope to draft an application and job description for owners' council membership. Do other families use a formal application and job description to select owners' council members? What key points should be included in these documents?

Advisers' and family members' replies:

One of the greatest challenges facing a family enterprise as it crosses generations is to help the next generation learn that service on the family board or council is not a prize or an honor, but entails a responsibility and a level of competence. Young family members are eager to participate, and a generative family should honor and support that desire. Yet prospective members of any family governance process need to be not just committed and available, but also capable and knowledgeable.

In addition, younger family members, who have grown up in the family but who are relative strangers to the world of business, may have trouble separating the fact that they are family members from their responsibility to be informed, educated owners as they inherit ownership. As effective business families transition to third-generation leadership and ownership, they create an educational program that helps young people, and sometimes those marrying in, to learn about the family enterprises. Some families anticipate this need by offering programs that they call ownership education for their young people, to combat what they feel is a possible entitlement mentality that can arise in wealthy households.

Potential roles in family governance might include serving on the family council, on the foundation board, on family committees and even as trustees of family trusts. Each one of these bodies might need candidates and might be open to family members who are ready, willing and, most important, prepared and able.

Family enterprises also should define exactly what is needed to be responsible participants in governance activities and members of various family councils and committees. The requirements for service on a family council are different from those for service as a board member, as an adviser, as part of a family committee and as a trustee. Families that have large assets and complex business and family governance find that in order to operate, the best people must be prepared to enter responsible positions. The family itself must create educational programs.

Since membership on an owners' council entails serving as an adviser to what can be a large and complex enterprise, the family is wise to define clearly what the requirements are for service. While young family members see the rewards and benefits of ownership, they are not really aware of the accountability to each other that they have as owners. The family elders might define how a forward-looking family member can prepare for such a role. Some families set up internships, or mentorships with an experienced owner or, perhaps, a period of serving as an observer before someone can become a full member of a board or council. The key is that the people who are "on" a council must agree to be informed and capable of understanding and making decisions. Family members should not be competing for roles, but rather preparing and readying themselves.

It seems very businesslike to have a position that must be applied for, but in fact, this helps young family members realize that that is not a family entitlement. Every family service position should have a job description stating what is expected in terms of commitment, and also the skills and competencies that are needed in the job. It might also suggest how a family member can prepare for such a role. The job description might explain how people are selected, and when this is done. The owners' council might name a recruitment and family development committee to write this description; inspire family members to step up, declare interest and develop their skills; and then begin a formal process of application, interviewing and selection.

Dennis T. Jaffe, Ph.D.

Wise Counsel Research

www.dennisjaffe.com

We recently drafted a job description for our family council chair that outlines all of the work of our family council as if it were to be completed by one person. In developing the job description, we initially envisioned a formal application process to hire a single council chair. However, we have found that this model does not currently fit our family, and we have seen the work divided (along with compensation) in various ways, depending on the skills and available time of our members.

We worked on this document for a year, primarily in a committee. We started by generating (and agreeing on!) a list of ideal council chair attributes and requirements, formalizing the council's scope of work and considering how to remain flexible with both the selection process and the division of responsibilities.

In the same way, we outlined the responsibilities of all council members. We have since transferred this information to an orientation document for new members, and it purposefully remains general. We have arrived at a model that encourages family members to participate in and rotate off the council based on their availability rather than hiring a single family member to run the council indefinitely. Each year, the council members discuss and realign their roles and responsibilities on the council, which allows for changes based on what is happening in their lives and the projects we are working on.

We continue to work on ways to evaluate ourselves in a positive, non-divisive manner. We see this as an important part of maintaining a healthy, productive and always-improving leadership.

Nick Shepard

Smith Family Council

Menasha Corporation

nickeshep@gmail.com

First, a note of caution about processes and documents before looking deeper into family council application and membership processes: Do not be overwhelmed; this does not happen overnight!

Lessons learned from Port Blakely Companies' Eddy Family Council:

1. Give yourselves time. It took eight years before our constitution was "finished."

2. The process is more important than the product. We recently found three drafts of our family council handbook written in 2008, 2010 and 2012, so after 16 years of family governance, our goal is to finish a strong document this year.

3. Follow what you set in place. Tweak it all occasionally, but read the documents and follow them. As our former human resource vice president stated, "It's not the glitzy fun stuff, but now we can turn to it for guidance."

In our family, the family assembly consists of descendants from the three original owners, adoptees and married-ins (currently about 140 members). Anyone over the age of 21 is eligible to be a family council member. They are elected by the family assembly according to the procedures set out in the constitution and the family council handbook. The family council is composed of nine members, each elected for three-year terms, with one-third elected each year. The constitution lists our criteria for candidates: (1) time availability, interest and commitment; (2) a representative balance of branch, age and gender; and (3) additional skills learned from education and work in the legal, business, educational, administrative, communication or event planning fields.

The application process begins when names are suggested to the council's governance coordinator. Any family member can suggest a name. Each applicant receives an application packet with three documents: The Family Council Applicant Information Sheet, an Applicant Profile Form and a Family Council Membership Agreement.

The Applicant Information Sheet provides an overview of family council details. It has three parts: the mission of the family council, the criteria for candidates and a brief description of the work of our four family council committees (Governance, Education, Communication, and Meetings and Planning).

The Applicant Profile Form requests contact information (home and work); names of the applicant's spouse and children (and children's ages); information on the applicant's educational background; and a list of the applicant's hobbies, skills and interests. In addition, the applicant is asked the following questions: What skills and abilities, both personal and professional, will you bring to the Council? What would you like to see the Family Council accomplish in the next three years? What are your current and past board memberships and volunteer commitments? Do you have any previous work or study experience related to Port Blakely's business activities?

Our Family Council Membership Agreement is reproduced below.

The returned applications are collected, reviewed by the family council and mailed to the members of the family assembly with a ballot. At the annual meeting, ballots are counted by a non-family employee, and the results are announced by the family council president. After the election, all new council members participate in an orientation seminar with the family council president and Port Blakely staff. This seminar includes an overview of the history of the family council, an overview of family council work, a review of the family council documents and clarification of expectations and information on the family council committees. The orientation meeting ends with a discussion concerning the area in which the newly elected members would like to work.

The 16 years of our family governance have seen ups and downs and fits and starts as well as periods of smooth operations. From the family council members' application process to the final thank-you ceremony, the work of serving the family provides valuable experiences in family business and board leadership. Family governance is work, but it is work that transforms a family connected to its business into a true business family.

Charlotte E. Lamp, Ph.D.

Shareholder, Port Blakely Companies

Founder, Rockwood Consulting LLC

www.rockwoodconsultingllc.com

EDDY FAMILY COUNCIL MEMBERSHIP AGREEMENT

I, _____________________________________________, understand that the Family Council meets at least four times a year for two- to two-and-half-day sessions, with additional teleconference meetings. This does not include the annual Family Assembly. I understand that I am expected to attend all meetings. I will put them on my calendar.

I have the time, the commitment, the interest and the desire to participate on committees that may require extra time and effort outside of scheduled meetings.

I will respect the confidentiality of discussions with members of the FC.

I have read, understand and support the Mission Statement and purposes of the FC as stated in the Informational Packet provided for me by the Family Council Governance Committee.

I agree to read all material prepared for me before coming to meetings.

I will strive to represent the interests of the whole family assembly, not only my personal interests or those of my family branch.

I understand the basic principles of cooperative conflict management, and I appreciate the necessity of applying them in family and family-business relationships. I promise to apply them to the best of my ability in my role as a Family Council member.

If I find I no longer have the time, interest or commitment to fulfill my responsibilities as stated above, I shall offer my resignation so that another person may take my place.

Signed _____________________________________________ Date _____________________________________________

Start by having clearly articulated job descriptions and a formal application process for councils. One important distinction is that ownership councils address matters of ownership, while family councils work with more family-related matters, so there may be specific requirements for each council. Some families may mix these responsibilities. In either case, these councils are the primary governance structures in business families, and treating them with a high level of professionalism helps achieve their full potential. The more forethought that goes into forming the team involved with your respective council, the better the results will be.

The job description for serving on the council guides the application process. Some key points to consider including in the job description are:

• A clear statement of the purpose for the owners' council. You need to articulate the purpose to guide the overall function of the council, and to let people know what the goals of serving are.

• Expectations for the time commitment involved on a monthly and yearly basis.

• Standards for communication and interaction as a council member. This is a leadership position, and members will serve as role models to the entire family.

• The desired credentials, experiences and personality traits of members.

• Compensation (if applicable).

The formal application process should aim to ask meaningful and provocative questions of candidates. You will need to learn about people's experience and also dig deeper into why they want to serve. No one has a degree in "family council," so you will want to assess the candidates' capabilities that make them an asset to the council. Because family councils have a highly interactive, generally non-hierarchical structure, you want people who can appreciate different perspectives and will work well together to achieve consensus as a team.

Key elements to learn about and ask of potential candidates:

• Educational background.

• Job experience.

• Prior leadership and board/council experience.

• Specific skills they have that are beneficial to serving on the council.

• Why do they want to serve on this council?

• How do they deal with adversity?

• How do they react when they do not get their way in a decision?

• Have they ever worked with someone whom they disagreed with? How did they reach a compromise with that person?

• How do they manage themselves when upset?

• What are their personal values?

Governance councils achieve maximum effectiveness through a mix of clearly articulated intent and consistent engagement from people who truly want to do the work involved. An ideal council has a diverse blend of people with complementary perspectives who can work as a team for the good of the entire family. Having a professional job description and formal application process will attract family members who are able to fulfill the responsibilities of the council.

Joshua Nacht, Ph.D.

Consultant

The Family Business Consulting Group

www.thefbcg.com

I would discourage the use of a formal application to gain entry to a family council. Family councils should be inclusive in nature, not exclusive. The best family councils are those that open up their doors or cast a wide net. These family councils intentionally welcome engagement from the family at large. Of course, entrée to a family council can and should be mentioned in the council's charter or the family constitution. Guidelines might include a minimum age for members, number of meetings and term requirements.

While I don't find an application to be necessary, I definitely condone family council job descriptions. They are a great way to explain the specific requirements, processes and committees that make the family council work. Job descriptions can inspire and foster engagement. They clearly communicate the characteristics of the job and the skills required.

I would encourage family council members to write their own job descriptions. How do they see themselves contributing to their family council? Somehow, I get the feeling that a job title like "Chief People Officer" might have come from a creative job description that took off. Whatever inspires or motivates a family member, the family council is the place to fulfill it.

A job description should be very clear about the task(s), expectations, compensation and accountability. Specific job descriptions dovetail nicely with family council documents that communicate the path to leadership.

Explain the governance leadership positions in the family and in the business. Create a leadership model, a grid, key benchmarks or all of the above. But be clear when you spell out the responsibilities and the roles that come with leadership. After all, the family council is the best way to develop and position family members to serve on the board of directors of the family business. Your team and its leadership are the vehicles for taking action on the issues that matter for the family and the business.

Ashley C. Levi

Family Council Consulting

ashlevi@bellsouth.net

Copyright 2017 by Family Business Magazine. This article may not be posted online or reproduced in any form, including photocopy, without permission from the publisher. For reprint information, contact bwenger@familybusinessmagazine.com.

What is the best way to determine an appropriate amount that a multigenerational family-owned business should spend annually on family governance, leadership development, education, communication and engagement?

What is the best way to determine an appropriate annual investment for family meetings and other social activities to foster good relationships and cohesiveness?

What is the most advantageous way to fund these expenditures—as a reduction of dividends, by the company from corporate profits or cash flow, or through some other means?

Advisers' and family members' replies:

In our study of more than 70 large, global 100-year business families (reported in several working papers, including "Good Fortune" and "Releasing the Potential of the Rising Generation"), we found that one of the most striking aspects of these families is that they invest in the development of governance and next-generation engagement.

In a large family, moving to include 20 or more family members, the commitment can be quite extensive. Meetings, consultants, family retreats, educational programs and communication platforms can add up to a huge expense. Each of these families has in effect made the choice: We have a profitable business and family resources, and we want to invest them in the development of family cohesion and development.

While the expense ultimately comes from the family resources, the mechanism for doing that varies. If the family has a family office, the cost often is part of its annual budget. If the family has a privately held family business, the cost can come from the profits, or it can even be allocated as a business expense. However, if there are non-family owners (or if the business is owned by two unrelated families), the family cannot take the expense directly from the company; it must be taken from the profits. The cost of family governance et al. is a family investment in the future, similar to a family business decision to reinvest some of its profits in the company to support future growth and sustainability. The family discusses the matter and makes a shared decision to reinvest in this way.

That said, every family has a different legal and organizational structure for holding family assets. One family, for example, had multiple individual trusts that were administered by a family trust company; they took the cost of governance out of multiple trusts. This is a decision based on rules and how wealth is structured, rather than on any family intention.

The principle involved is clear—the family has made a choice to invest in its future by funding the support and development of a connected, engaged and skilled family, and they make this commitment before distributing funds to individuals.

How much will this entail? When all of the desired activities are added up, some family members might experience sticker shock. The test of their intention then comes with funding the budget. Because family members have different goals for their governance, engagement, communication and education programs (and, of course, families can encompass vastly different numbers of people), there is no way to prescribe an amount. But it is higher than most people imagine.

In the most successful families, a family council or similar group must create a budget that is submitted to the family board, and then make sure that the funds allocated are spent wisely. Considering the size of the budget, the family should decide on each item. This ensures that there is participation when events are planned. It also ensures that family members understand there is a cost to what they are doing, and that they have to commit to each other to receive the benefit they desire.

Dennis T. Jaffe, Ph.D.

Wise Counsel Research

www.dennisjaffe.com

When Jim Warjone, our third-generation CEO, chose to begin our family governance program, he explained to the board and to the family: "Investing in your investors is a wise business decision." His words form the cultural basis of Port Blakely's decision to fund investor activities as we currently do. Our present CEO, Rene Ancinas, stated, "It is less about ‘costs' and more about investing in cohesion and strongly aligned ownership."

Our nine-member family council holds four weekend meetings a year in addition to the three-day annual meeting. The family council budget is quite easy: We have no income, only outflow! However, such a trite statement does not explain the substantial positive impact that developing an educated and emotionally connected family has on the business. How does one measure those outcomes? For us, family governance has resulted in greater stability of the business and deepening relationships among the board, management, employees and family members.

At present, our annual budget covers the costs for nine council members, a non-family liaison (our human resource vice president) and our CEO. The latter two employees are non-voting company representatives. In the 16 years our family council has existed, the budget and allocations have varied. Ordinarily, the budget for the family council is a very minor percentage of the company's gross income, roughly equivalent to the company's annual charitable giving budget.

Our annual budget is broken into six categories: (a) Management Services, which includes meeting fees and annual stipends; (b) Travel and Meetings, which also includes the expenses for four council members to attend Transitions West as part of leadership development; (c) Meals and Entertainment, which does not mean fun and games, but rather allows us to take occasional forest tours or to visit places connected in some way with the business or the family; (d) Professional Services, such as training by hired consultants in whatever way may be helpful or needed; (e) Recognition Gifts for members at the end of their service on the council; and (f) Office Supplies and Website Maintenance, though a lot of website work is now accomplished by the family council's communications committee.

Our budget is all part of the company's budget for investor relations. It comes neither from the dividend program nor from the redemption program, but rather from cash flow. Again, this funding practice goes back to the undercurrent philosophy, "Investing in your investors is a wise business decision," especially when those investors are your relatives!

This investor-focused culture is also behind the company's practice of paying for all family members to attend the annual meeting. We define "family" to include all descendants, adoptees and married-ins (including domestic partners and engaged ones). Costs for annual meeting attendance, including most social activities, are paid by the company and are not included in the family council budget. However, as CEO Rene Ancinas pointed out, "During difficult economic times, and at the family council's recommendation, the company has tapered back the annual meeting and family council activities as a sign of solidarity with the company. While this may not have a large material effect on finances from an overall company standpoint, the demonstration of support for the company goes a long way to send a message to everyone that the family wants to exhibit responsible ownership in all its many facets."

Charlotte E. Lamp, Ph.D.

Shareholder, Port Blakely Companies

Founder, Rockwood Consulting LLC

www.rockwoodconsultingllc.com

While having a rule of thumb, such as a percentage of profits, would be helpful in determining a family budget, the driving factors are too complex to define a simple metric. When setting a budget, a family must take into consideration its culture, climate and goals.

How does your family feel about spending money on nice trips? Do you value investment in education? Should service to the family (such as family council members) be paid or volunteer positions? Answers to questions like these can help you determine your family's culture.

Similarly, climate affects financial allocations. If the economy is suffering or your business is facing a downturn, it may be a time to rein in expenses. Even if funds are available for a lavish family vacation in a slow economy, the signal sent to employees who are facing layoffs, hiring freezes or suspension of raises may be inappropriate.

Ultimately, the primary driver of budget should be the family's goals, such as:

• Next-generation leadership development.

• Investment in family relationships.

• Development of family policies or governance structures.

• Definition of ownership vision and financial objectives.

• Improvement in communication infrastructure (e.g., website, news­letter).

• Educating the family about ownership roles and responsibilities.

Goals should be filtered through the lenses of culture and climate to determine an appropriate budget. There are cost options for achieving goals, such as inexpensive webinars vs. contracting speakers for a family event or holding a family meeting at corporate headquarters vs. a high-end resort.

As families get larger, family meetings also have an impact on the budget. We find that families who meet twice a year are more cohesive than those who meet less often. Ideally, one shareholder meeting is held at headquarters with presentations by management and the other meeting focuses on building family relationships. Some families hold their family-focused meeting at a resort location annually, while others save up for a destination trip every few years. Beyond location, the cost depends on the geographic dispersion of family members, extracurricular activities and whether the family pays for its travel to meetings.

In addition to family meetings, budget categories can include:

• Communication (newsletter, website).

• Seminars/education (family business conferences, paid webinar series).

• Consulting resources (meeting facilitation, assistance in family policy/governance development).

• Compensation (family council members, family council assistance).

The budget process should start by defining goals and then establishing budget categories. Draft a budget, evaluate based on affordability and adjust accordingly. This final step requires consideration of the various sources of funding. Most families pay for family meetings out of business profits, but you should consult with your accountant about allocating family expenses to the business. Typically these expenses can come under the heading of shareholder relations. Some allocate a percentage of dividends to pay for family expenses—the downside being that these expenses are paid after taxes. Some families establish trusts or contribute to a family pool to fund family engagement.

Regardless of your culture, climate and goals, developing a budget forces the family to reflect on its objectives and appreciate the investment made in the family. Similarly, it encourages management to reflect on the importance of maintaining a strong shareholder base and the investment required to achieve cohesion. Investing in family sends an important signal that the business is committed to its owners and vice versa.

Jennifer Pendergast

Senior Consultant

The Family Business Consulting Group

www.thefbcg.com

How much should a family business spend on family? Many families that I work with struggle with this question. My rule of thumb is that a company should be prepared to spend as much on the family as they do on their corporate board for two simple reasons:

First, the biggest risk that a family business faces is the family itself. If you ask the management team of a family business to name the biggest risks that the company faces, they will cite market pressure, competitors, etc. Most of these risks will manifest themselves slowly over time. The risk of the family can escalate to a point of causing significant damage to the business in a matter of weeks through a well-timed lawsuit or a family blowup.

Second, a family business's biggest asset is the family. Family provides patient capital, they act as stewards and they make values-based decisions about how to care for employees. Research by Ernst and Young ("In harmony: Family business cohesion and profitability. Initial findings from the global survey of the world's largest family businesses") found that families who are highly cohesive increase their Return on Equity by 35%. These companies also brand their businesses as family businesses; they focus on growth and sustainability.

What should a family do to mitigate the risk and maximize the benefit of being family owned?

• Focus on transparency about the business and its operations. This is the context for why the family is still working together; the family should understand what is going on.

• Ensure that the family council is doing meaningful work in order to help the family serve as good stewards of the business.

• Create an inclusive and transparent decision-making process regarding family governance and conflict management.

• Focus on building working relationships with all family members. Friendships and close family bonds will often come after the family has learned to work together.

• Make time for family socializing every time the family gets together for the business.

• Ensure that the youngest generation is getting acclimated to the business and family early.

Building a highly cohesive family that is adding value to the business requires a significant investment. Here is what I recommend the company and family should pay for:

• Travel and hotel for all family members, including the youngest generation.

• Youngest-generation babysitter, outdoor educator, activities, resources, tours and educational events.

• Meals.

• Meeting rooms.

• Family council chair compensation.

• Development and education expenses to ensure the current and next generations are capable of leading and stewarding the business and board.

The business and family can, and perhaps should, share the cost of the family council. How the family and business divide the mix is unique to each family, but there is one thing they all have in common: They all believe the work of the family council is vitally important for the overall success of the company.

Meghan Juday

Family Council Chair and Director, IDEAL Industries

Advisory Board Member, Initiative for Family Business and Entrepreneurship, St. Joseph's University

familybusinesstrategygroup.com

Copyright 2016 by Family Business Magazine. This article may not be posted online or reproduced in any form, including photocopy, without permission from the publisher. For reprint information, contact bwenger@familybusinessmagazine.com.

Cliff Lawn, the 105-year-old Hill family home in Nashville, has hosted six generations of the Hill family at Christmastime. Home to Barry and Wentworth Caldwell Jr. since 1973, Cliff Lawn has been in the H.G. Hill family for three generations. Wentworth Caldwell Jr.—my father—is chairman of the H.G. Hill Company, a family-owned real estate business established in 1895. He has worked full-time for the family business for 50 years. My three sisters and I grew up at Cliff Lawn.

Every year on Christmas Day, members of the Hill family (more than 46 direct lineal descendants, plus their spouses) are invited to a seated luncheon at 12:30 p.m. Fond memories and shared customs have shaped the holiday celebration. My great-grandmother, Mamie Hill, started the tradition. She loved having the family gather for a big luncheon on Christmas Day. Today, if all the family invitees (62) actually RSVPd in the affirmative, we would be spilling out into the street! Christmas at Cliff Lawn is a wonderful occasion. We consider the tradition to be part of our family "glue."

Open up the antique dining room sideboard at any time of the year, and you'll find it crammed full of used place cards. I always thought this was kind of weird. My mother is not a recycler. "Cheap" isn't a word I would use to describe her, either. Yet for years and years she has salvaged the (sometimes food-stained) cards after lunch has concluded. It's a wise idea, really. When I try to count all the cousins who are invited to Christmas lunch at Cliff Lawn, I easily exhaust myself. These place cards definitely come in handy for keeping track!

A formal affair

Christmas Day luncheon is a very formal affair produced on a grand scale. It takes days, and a lot of physical, mental and emotional energy, to execute. The tables (there are several of them) are set a week in advance. This is the only time of year that silver goblets and flatware, crystal and china, and other elegant tableware are pulled from the floor-to-ceiling locked cabinets. The items are cleaned by hand, polished, and counted and re-counted. The white, starched, monogrammed linens are unwrapped from their dry-cleaning bags, counted, re-counted and put in place. The silver coffee urn, tiny silver coffee spoons and demitasse cups are placed on an antique table in the living room for après-luncheon. Every year my mother complains about this massive undertaking, and every year my father begs her to do it again. Like my grandmother and great-grandmother before her, she has exquisite taste and can execute the tradition established for the family celebration so long ago.

The fuss involved in dressing for the occasion is on par with the elegant setting. My great-grandmother loved having the family gather for a big Christmas lunch, and insisted on dressing in her finest. Everyone else was expected to do the same. The children wore velvet suits and dresses with lace collars. The men were attired in three-piece suits, and the ladies always wore their special Christmas dresses.

The children were not allowed to bring their favorite toy from Santa to the luncheon. This was mandated by the older generation, who feared a slip-and-fall on a truck or doll. As the cliché goes, "Children were meant to be seen and not heard." Thus, the younger generation and their young families dined in a separate room, the sun porch, off the main dining room. Well, that was fine with them, because it provided a more direct, stealthy route to the bar set up by the kitchen!

Nowadays, the seating isn't so much a function of age or hierarchy. Most large family celebrations involve a "big" table and a "kids" table. But in our case, there are three "kids" tables—and the "kids" range in age from 1 to 60. The "big" table is reserved for the most senior (third-generation) members of the family, and for those either engaged to be married or pregnant. The rest of us appreciate just having a space to sit and eat comfortably. Be sure to bring your own drink to the table. The chairs are arranged so tightly that once you sit down, you might not be able to get up!

What's a family meal without drama?

Of course, this family Christmas luncheon has seen its share of drama. There was the year that the cook forgot to cook the turkey! Long into the cocktail hour(s) it was discovered that although the cook prepped the turkey and placed it inside the oven hours earlier, he had forgotten to turn on the oven. Needless to say, the party continued, and I assume the turkey tasted better than ever when it was finally ready.

Another legendary family Christmas was the year that little Jimmy pushed cousin Edward into the pond and knocked out all his front teeth. A bloody sight and soaking wet, Edward (affectionately called "Prince") was wearing his new blue velvet suit with a lace collar. His mother, Aunt Frances, still talks about that velvet suit.

And of course, when a business family gets together for Christmas, there is sometimes a tense discussion or two. Gather together the cousins, the in-laws and the out-of-towners, and the comments or quips can become competitive in tone. The Christmas gathering can turn into a stage for someone's posturing or an opportunity to comment or criticize. I observed this beginning to happen in our family several years ago. Some family members, especially the younger ones, might not recognize this scenario. That's good.

Whether anyone else witnessed it or not, I am aware that there were a few Christmas lunches when some strong opinions were shared on the subject of the family business and some stressful moments arose. These were brief, but I noticed them because the mood lingered with my father, the chairman/host, long after the last guest had left. Christmas is calmer now that we have a family council. In a way, our family council saved the Christmas celebration for our family.

Before the Hill Family Council was established in 2005, the only occasion to meet and discuss H.G. Hill business was the annual shareholders' meeting in May. At this meeting, the shareholders heard a report from management. Suffice it to say, there wasn't a Q&A period, or any interactive feedback or sharing, if you will. If any issues, concerns or questions cropped up about the family business, they would fester until we were together again at Christmas. I think we all agree that Christmas lunch is never the right time or place to talk business, especially after a glass of wine or two.

Never did I anticipate that the Hill Family Council, which meets monthly, would be such an important Christmas gift for our family. We now have an appropriate place to voice our concerns and share constructive criticism. The benefit is seen and unseen. Now Christmas lunch is reserved for our special family celebration.

Old and new traditions

Over the years, the party has seen some changes. Of course, the traditions remain. However, the dress code has relaxed a little bit. The children now arrive toting a favorite new toy, and are encouraged and enjoyed by the adults. In fact, the children have created their own tradition of commandeering the entry-hall staircase for their fifth-generation group photo. It is delightful to see the curious kids climbing all over Cliff Lawn and exploring what must seem imposing and antique. After all, they get the invitation only once a year.

I watch the little cousins discover the hidden "Service" buzzer in the library, or comment about the scary portrait of Great-Great-Aunt Elizabeth ("Tante") in the living room. Inevitably, someone will tell the story of the household ghost, "Broderick," starting with whispers that soon morph into shrieks and ultimately scare a child to tears. Screams, running and loud laughter always follow.

When we gather round to say a blessing and give thanks at the start of the meal, more than a few tears are shed. Perhaps it's nostalgia, ambivalence or overwhelming gratitude. Behind my own tears, I wonder how long this tradition will last. The family is growing larger. The fifth generation is marrying and multiplying. In ten years' time, we could be looking at a luncheon for 100! Where do we go from here? Who would be willing to take on the colossal task and financial obligation in the years to come? How do we continue to manage and maintain this holiday tradition that is so beloved in our family? Without Cliff Lawn or senior family leadership in the family business, would it still be relevant? Is it time for new traditions? Do my children care? Do they fully appreciate a long, formal family luncheon in the finest tradition of Southern style and hospitality? Would they rather be on a beach, or a ski slope or at home (still in their pajamas) and nibbling on caramel cake?

I think we all share this concern, which is a little comforting. I think this because, one year while all the little children were scrambling to find space on the front steps for the annual photograph, I heard my father's booming voice from the back of the room. "Raise your hand if you know whose house this is! And what's MY NAME?!"

As a family, we are all so grateful to my mother and father for hosting Christmas luncheon at their home. They willingly take on the task and give up their day for family and tradition. On this day we were always meant to celebrate our family, share, give and be grateful. These shared values are exactly why Christmas luncheon at Cliff Lawn proves to be a timeless tradition in the Hill family.

I hope that the tradition of family and Christmas parties will continue. And I imagine that the spirits of my ancestors and Broderick himself will be joining in the fun! 
 

Ashley Caldwell Levi is a fourth-generation owner of the H.G. Hill Company. Since 1895, the H.G. Hill Company has built a legacy of service and stewardship in Middle Tennessee as owner of one of the largest privately held real estate portfolios in the Southeast.

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