Rules To Live By

Before creating the policies themselves, the family needs to lay down the rules of engagement. "Every family member participating in the discussions needs to be able to withstand any disagreement and not take it personally," says Joseph Astrachan, co-author of Family Business Policies: Your Guide to the Future (Business Owner Resources Publisher) and a professor of management at Kennesaw State University in Kennesaw, Georgia. It also means participants need to put aside or resolve old resentments and hurt feelings before the discussions begin. "Otherwise, the family winds up frustrated by the process or constructing something on an unstable foundation."

Each family's policy will be different, of course, but underlying any written document are two basic principles:

1. What's the purpose of the family business? Will the business operate to serve the family or will the family operate to serve the business?

2. How will important decisions concerning the business be made? Will they be by a simple majority rule vote of shareholders, through consensus, by the chairperson in conjunction with a board of advisors, or through some other type of arrangement?

Family business advisors experienced in developing policy guidelines can help move the process along more quickly. They can provide input about policy issues and help families make fewer false starts. But they don't make policy--that's the family's weighty, but vital, responsibility.

This article was originally published in the February 1999 print edition of Entrepreneur with the headline: Rules To Live By.