A clear family governance system can help bind the family and the business together in healthy ways and aid in conflict resolution, successor selection and other family business issues. Without good leadership of the business and the family, and clearly defined governance mechanisms for both, there is a strong pull toward separation of the family from the business. By 1998, such was the state of the Eddy family. Since 1903, our family has owned and managed the Port Blakely Companies, which now consist of separate and synergistic timber and real estate businesses. The wisdom and foresight of the company CEO, my cousin James Warjone, prevented total separation.
“I am interested in the family being able to govern itself, to handle its own disciplines, to be able to share the values and the vision of the company and also to be aligned with these as our mission,” he recently stated. In 2000, he hired John Davis of the Owner Managed Business Institute, an international consulting firm, to assist us in instituting family governance.
The Eddy Family Council now serves as the family governance mechanism for the Port Blakely Companies. The board of directors—especially the family directors—represents the unit holders; the management team represents the company; and the family council represents the Eddy Family Assembly, which consists of the unit holders, their spouses and children. Our council has enabled the family business and our business family to engage in the unique and delicate interplay of intertwining parts without one short-circuiting the other. We are still growing and learning!
Forming the council
In 2000, at the Port Blakely Companies' annual meeting, CEO Jim Warjone rose and asked for volunteers to form a task force to draft a family employment policy. This request for volunteers led to what Jim describes as “a bouquet of interesting and enthusiastic people.” Five volunteers from two different generations were chosen to form the task force. At the 2001 annual meeting, after John Davis explained to the family the necessity for a family governance mechanism, the family voted to transform the task force into a provisional family council. In 2002, this same group became the Eddy Family Council by unanimous vote of the family assembly.
During the first three years of the council, the meetings were long, grueling sessions with everyone gathered around the table. The tone and ethic of the council materialized; people came ready to work and worked hard. Before the first meeting in November 2000, the participants were given extensive reading materials. Under the watchful eyes and skilled tutelage of our consultants, this group learned the skills of collaborative work and the ins and outs of family governance. Work on the Eddy Family Constitution, which began the second year, finally finished in 2006! The extreme tolerance for a heavy workload was balanced with humor, respect for one another and open communication. In those first three years, the council also began the sensitive, but profoundly revealing, work of “de-mything” the family myths, clarifying sensitive issues from history.
The fourth year of the council saw a shift in focus and work patterns. Council committees became the focal point for work, with less time spent in a large group. Hence, the agenda reflected this shift. The large group continues to meet for various updates and committee action items needing council input. The presence of Jim, our CEO, and/or Lindsay Geyer, the non-family vice president of human resources, serves to link the business and the family. A binding force for the council is the group members' open expression of appreciation for one another, in keeping with one of our family values.
To balance the strong work ethic, there is another side to our culture. During weekend-long council meetings, evening meals are a celebratory event and a chance to unwind after a hectic day. The council gathers Friday evening for the weekend work. This begins with casual dinners that spell a transition from home life to council life. Saturday night is a more formal affair, with “dress-up” as the norm. The council has become known for the abundance of food, wine and animated conversation. In 2003, as the council intently discussed the topic of branding, our president quietly tapped away on his computer. Suddenly on the screen appeared, “The Eddy Family Council: Meeting and Eating since 2000.” Thus was born the council brand, clever and descriptive.
The ongoing formation of the family council falls under the auspices of the Family Council Development Committee—the FCDC. This committee is responsible for enticing three family members to stand for election to the council each year and for overseeing their integration into the life and culture of the council. To make the task of integration easier, the committee is currently finalizing the “Family Council Handbook,” a compendium of council policies and procedures. New members receive reading materials and are encouraged to choose a mentor member. The FCDC is also responsible for continued “in-house” development of all the council members. We laugh about one instance when we thoroughly bored the family with our presentation at the annual meeting. On the exit survey someone curtly wrote that we were in dire need of learning presentation skills. The company hired a consultant to train each of us, a benefit for us that was greatly appreciated by the family!
Governance mechanisms
If one is working only with the concept of a single family, family governance is quite obvious. It is the parent figures who institute, follow and change the policies and procedures of the family within the cultural norms of society. To a certain extent, the same is true for a business. Generally, the policies are set by the board of directors and are carried out by the management team within the parameters set by norms and laws. Fairly easy.
Combine business with family, however, and the governance of these overlapping systems can become confusingly intertwined. There may be some adult family members who do not work for the business and are silent owners, and there are probably business managers and outside directors who are not family. In a multigenerational/multibranched family business, the governance of the family is even further separated from that of the business. The proportion of family members to non-family members directly involved in the business becomes less and less. This can put a family CEO in the uncomfortable position of trying to keep the family and the business tied together. It also can add tremendous tension between the business and family when interests begin to separate.
Governance documents serve to formalize the policies and procedures necessary in keeping family issues in the family and business issues in the business. We have two council committees that oversee the governance documents and the budget for the Eddy Family Council. The Constitution Committee is basically responsible for our governance documents and the Budget Committee for our funding. The principal governance documents that the business and the council have developed are the redemption policy, the family director policy, the family employment policy and the Eddy Family Constitution.
The redemption policy was written and adopted by the company managers about the same time that the family council was formed. Our CEO expressed the need for this policy by explaining, “If you want to see ugly behavior in a family member, tell them that their unit value or stock value is artificially low, tell them that they have no way to sell it and then, on their side of the situation, give them a real need, a present need, to have to liquidate part of it. They feel trapped. And so that's why we added an escape hatch for people that were either not philosophically aligned, or under financial pressure.”
In the early years of the company, a family member became a director on the urging of his mother. Because female descendants could not serve as directors, they made their influence felt by asking management to put their sons on the board. Such a “non-policy policy” definitely needed correcting! The writing and adoption of the family director policy was a coordinated effort between council members and the Nominating Committee of the board. This policy clearly delineates the requirements to be a board member and the process by which one is chosen.
The need for a fair and clearly stated family employment policy arose because some family members wanted to work for the company and could not do so, while other family members wanted an internship program for college students. This policy now guides the company's human resource personnel in hiring family members.
The Eddy Family Constitution contains the family's mission statement, the vision and values statement, and the policies and procedures that govern the family assembly and the family council. It took six grueling years to develop and adopt this document. It was not always a smooth ride, but as one person intimately familiar with it stated, “It's drudgery and it's hard work and it is not the glitzy fun stuff, but it is beneficial. We have got it. We have places to turn to for answers. It creates the structure and a place for people to work to follow norms.”
Speaking about our budget is easy: We have no income, just outflow! Since we now have a few years of experience and budgetary history, the council president works with our management liaison to create and monitor the budgets. The CEO has a budget for investor relations, which the Compensation Committee of the board of directors approves. Our CEO has made it very clear that investing in the investors is a wise business policy. The costs of having a family council do add to the expenses of running the business. However, he points out that rather than asking, “Can we afford this?” we should ask, “Can we afford not to do this?” These are important investor relations activities that contribute to the sustainability of the business because they contribute to the sustainability of the family.
Communication
Communication is essential. Getting it right is our ongoing task. Good communication builds confidence and trust. In some ways, the family council acts as the proverbial switchboard operator of bygone eras. When the connections are right, people are clearly heard. Confusion and turmoil can result if the wires get crossed.
The early council members set the cultural tone for open, honest and respectful discussions, which are often lightened with good humor. Recently, when we seemed to be stumbling over ourselves, we used the Myers-Briggs personality test to get unstuck. It was rather humorous to hear us publicly acknowledge our own foibles and communication styles, but we also found that the exercise helped us to communicate better.
Our Constituency Committee is the center of our communication between the council and the members of the family. Each council member has about ten family member constituents. After each council meeting, we relay to our constituents the business update, report on council activities and gather from them their personal updates and questions. This two-way communication is enhanced by an extensive family website that is updated monthly by an employee in coordination with our Website Committee chair. The pulse of the family is also taken through surveys conducted by the Survey Committee. Each year an exit survey is conducted at the end of the annual meeting; other surveys are conducted on an ad hoc basis.
Before the family council was created, the board of directors had little idea what the unit holders' attitudes and wishes were. The family directors spoke for themselves, but not really for the family. This has changed since the advent of the Eddy Family Council. Family directors attend our meetings on a regular basis, and the president of the council attends all board meetings as our non-voting liaison.
Most of the contact between the family council and the employees occurs through Jim Warjone, the CEO, and Lindsay Geyer, the vice president of human resources, who sit on the family council as advisers and liaisons. An emerging communication protocol helps our coordination with other family employees, especially during the planning of the annual meeting.
Education
One of the largest tasks of the family council is coordinating the education of family members about the divisions of the company, finances and the family itself. Because I have been both a teacher and an administrator, the Education Committee felt like a natural place to use my talents for the family. Our curriculum begins with our educational philosophy: “We believe education of the family is important to: a) heighten interest and pride in the history and values of the family, b) heighten interest and pride in the heritage of the business, c) enhance the ownership skills of family members, d) provide understanding of the values and the principles of the business and e) keep ourselves educated about the business as it evolves.” The educational goals and objectives are divided into adult education and youth education.
Our adult education component occurs at the annual meeting through business presentations by the company division managers and hands-on activities centered on an annual theme. In conjunction with company management, we host mid-year investor briefings as needed on such topics as financial planning and estate planning. In the years when we meet near our company headquarters, we have tours of our various operations.
Our youth educational component is known as Eddy Academy. During the annual meeting, while the adults attend business presentations, the children gather for various activities. We have four learning-strands: forestry, real estate, finances and family. For those aged five through 11, we use hands-on activities, video, storytelling, tours and experiments. Their day starts with a formal T-shirt distribution and dismissal from the adult group. The T-shirts are a fun way to keep track of our extremely active young relatives! For those aged 12 through 14, the last three years of Eddy Academy are spent learning more about business matters. For this, our company mangers put together a booklet entitled “How to Read a Financial Report.” This booklet contains far more than just financial information; it includes an overview of each of the divisions of the company and shows how family values are incorporated into the business. In 2005, we celebrated the first Eddy Academy graduation. When our teenagers turn 15, they receive a plaque formally accepting them into the family assembly. The company headquarters has a similar plaque listing the graduates.
Annual meeting
One of the major yearly tasks of the family council is the co-production with the company of the annual meeting. It is the job of the Family Assembly Day Committee to coordinate the weekend events with the company and the Education Committee.
Through the trials and errors of our first six years we have learned a few lessons:
1. We now alternate between sunny locations and our home office base in the Pacific Northwest.
2. To help family members plan their calendars, we schedule our annual meeting for the same weekend every year.
3. To accommodate those who work, we changed to a two-day event with the business updates on the morning of the first day followed by family-centered activities in the afternoon and a family dinner that evening. Sunday consists of family council topics in the morning with dismissal around noon.
The impact of the council
Over the past six years, our family council has clearly strengthened the business. Our succession issues have been eased. The first council president is now our CEO-in-training. When one family director recently retired, we found that the new family director policy enabled us to work smoothly to submit the family's nominee to the board. One of our fifth-generation college students is working in the company under the internship program. Through transparent and constant communication, the family's trust in management is rising significantly. We are slowly reconnecting the disconnected family members, and we continue to build a strong relationship with our employees and outside directors.
The family, too, has been strengthened since the inception of the council. Attendance at the annual meetings has steadily increased from 14 in 1998 to 85 in 2006. The family branch lines are dissolving as we all become more acquainted with one another. Most important, we are slowly “de-mything” our family myths.
While we have accomplished a lot in six years, we also recognize the need to hold ourselves accountable to the business and to the family. Thus, we have recently begun drawing up a strategic plan, based on our family vision and values statement and our mission statement as well as on the mission statements of the various committees. The work continues!
Charlotte Lamp is a retired (after 41 years) educator and a doctoral candidate in leadership studies at Gonzaga University in Spokane, Wash. She is a third-generation family member and shareholder in Port Blakely Companies, a member of the family council and chair of the council's education committee. The topic of her dissertation is the impact of family governance on the cohesion and harmony of the business and the family.
At a glance: Port Blakely Companies
• Two divisions: forestry and real estate
• Founded in 1864; acquired by the Eddy family in 1903
• Headquarters in Seattle, with holdings in Washington, Oregon and New Zealand
• About 90 employees (three who are family members) who plan, permit and oversee daily contracted operations
Eddy family
• Descendants of John Franklin Eddy from Bay City, Mich.
• Present family consists of three branches descended from each of three sons, the original family owners of the Port Blakely Companies
• 123 extended family members
• About 60 family business owners
Family Council highlights A brief overview of the major projects by year.
2000-2001: The Task Force Year
• Wrote the family employment policy
• Learned about family governance
• Annual meeting 2001: San Diego
2001-2002: The Provisional Family Council
• Began the task of writing the constitution
• Began committee formation
• Began constituent contacts
• Learned more about family council and the work
• Annual meeting 2002: Seattle
2002-2003: The Eddy Family Council, Year 1
• President: Rene Ancinas
• Formalized the council structure
• Committees fully established
• First investor briefing—mid-year
• First elections at the 2003 annual meeting
• Annual meeting 2003: Wickenburg, Ariz.
• Received the Family Business Management Excellence Award from the Owner Managed Business Institute
2003-2004: The Eddy Family Council, Year 2
• Welcomed first new members
• Second investor briefing—mid-year
• “How to Read a Financial Report” published for the family
• Eddy Academy established
• Annual meeting 2004: Seattle
2004-2005: The Eddy Family Council, Year 3
• President: Bruce Lemire-Elmore
• Agenda shift to focus on committee work
• First spouse welcomed to the council
• Eddy Academy gets T-shirts
• Annual meeting 2005: San Diego
2005-2006: The Eddy Family Council, Year 4
• The constitution is finished and adopted
• First Eddy Academy graduation
• Annual meeting 2006: Olympia, Wash.
2006-2007: The Eddy Family Council, Year 5
• Strategic plan begun under the direction of our consultant, John Davis
• Eddy Academy learned business management by creating their own Junior Achievement-type company
• Patrick Moore guest speaker at annual meeting. Topic: global warming
• Annual meeting 2007: The Boulders, Arizona