Playing by the Rules
When I was a kid, my siblings and I would play Monopoly for hours barely knowing the rules. We had some vague understanding of the game, but it wasn’t until we were in the heat of battle and someone was about to buy their third hotel for their Park Place property that we pulled out the rule book….especially if we were just coming around the corner and heading there!
I have been reflecting on how this simple childhood experience serves as an appropriate analogy for our attitudes later in life. Partners in a company are often coached that it’s best practice to have a Unanimous Shareholders Agreement or USA. Sound advice as this agreement will serve to protect the shareholders' investment, establish a fair relationship among shareholders, and govern how the company is run. In other words, it is the rule book. Yet, at the onset of a partnership, the suggestion is often a sore point for some partners. They are just starting their business, excited about the great possibilities and want to avoid thinking about the horrible issues that could arise.
Young people in a serious relationship will often push back when they are told that they should consider a cohabitation or pre-nup agreement outlining what happens if they break up. Why would they need a “break glass in case of emergency” document for a breakup – they’re in love! Who wants to think about the future worst case scenario when the best is happening right now?
This is human nature. We want to accentuate the positive, especially when it comes to family. And it is not that families do not believe in rules. We all agree knowing the “rules” when something goes sideways keeps things on track. It just makes sense. The problem is, when it comes to family, we are reluctant to write the rules down because we want to believe everyone knows them. That they are obvious. So then most families leave the discussion around rules, until the rules are needed, at which point, ironically, it is very difficult to have a reasonable discussion around rules.
The rules need to be discussed well in advance of ever needing to implement them, when good will is at its highest, and calm prevails. And the best process I know for this discussion is the creation of a family constitution, or a family charter as it can be called. A family constitution will bring clarity to all those topics that are too difficult to bring up, like the dissolution of a relationship or how to manage interfamily conflict. It works to reinforce good habits and processes when things are going well, so that you know what to do when they aren’t. The family constitution is not a tool required by families that struggle to get along, it is an invaluable piece of governance for families that want to continue to flourish, no matter what life throws at them.
A well-constructed family constitution provides focus and clarity for family members around unexpected events, disputes, and transitions. It sets out the rights and responsibilities of the family, and addresses such scenarios as:
What happens when the next generation graduates high school or university and shows up looking for a job with the corner office and a car allowance?
What is our family council?
What is the role of the council and how or when would I ever get to participate in this council?
What happens if some family members cannot agree on which investment to make?
Do we have a way to deal with conflicts as they arise?
How can I be involved (or not involved)?
But the family constitution is not all about the rules. It can also be a place to document the founders’ history and capture the stated family vision and values. The family can work together to define their collective legacy and identify the best framework to ensure that legacy is carried into the future.
Once created, the family constitution is then shared with all the members of the family starting at a very young age, so that there is transparency around the policies that have been created and the process to approach these policies.
A well-written and well-communicated family constitution is the best tool in assisting the family with navigating the inevitable tense situations that arise in any family enterprise. The family constitution says, “I know we are struggling right now, but we got this. We are going to make it through. We know what to do.” With one in place, you won’t have to resort to the tactics you used as a kid when you “accidentally” knocked the Monopoly board off the table after your brother tried to collect rent on his Park Place property.