How to Design Governance Policies for Family Businesses
Family businesses are built on shared values and visions, but these strengths often come with unique challenges, particularly in separating family dynamics from business objectives. This makes family business governance in Saudi Arabia and the UAE essential to preserving the structure and long-term success of these companies in both local and global economies.
In this article, Waleed Alkalash, a certified family business advisor in Saudi Arabia and the UAE, shares the key pillars of establishing effective governance policies for family business management.
How to Design and Implement Governance Policies in Family Businesses
The governance structure of family businesses can be compared to a building with four pillars, which include the following:
1. Defining Roles and Responsibilities in the Family Business
Building governance policies for family businesses begins with clarifying the roles and responsibilities of individuals, distinguishing between family roles, such as owners, shareholders, and board members, and business roles, such as management and operations.
It’s crucial that the distribution of responsibilities and planning for succession in family business management are based on individual competencies and qualifications, rather than family ties alone.
By clearly defining roles and responsibilities, a solid framework of accountability is established, fostering fairness and reducing misunderstandings.
2. Planning Decision-Making Processes
In any business, the decision-making process is central to success. However, in family businesses, it is particularly important to plan this process carefully to prevent overlap between business and personal affairs.
Successful decision-making in family business governance is facilitated by promoting the following values:
Transparency: Transparency is built by clarifying how decisions are made, who is involved, and the criteria used for evaluating options.
Conflict Resolution: Conflicts during decision-making are not uncommon, but they can be managed constructively through a family council or independent mediators.
Distinguishing Between Major and Minor Decisions: It’s important to differentiate between strategic decisions that require family involvement and day-to-day operational decisions that can be delegated to management.
3. Establishing a Family Council
A family council is an essential component of effective family business governance. It serves as a forum where family members can discuss business matters, enhancing communication and ensuring alignment on key issues.
The council’s objectives should be clearly defined, such as discussing ownership, succession planning, financial matters, and preserving family values. Regular meetings are crucial for maintaining focus.
Engaging a certified family business advisor can provide valuable external guidance, ensuring that discussions remain productive and focused on the best interests of the family business.
4. Building Strong Policies for Family Businesses
Governance in family businesses in Saudi Arabia and the UAE is strengthened by the creation of comprehensive policies. These policies serve as a set of rules and principles that all family members agree to follow.
Such policies cover various aspects, including employment, ownership, succession, business ethics, and acceptable behaviors, embedding a culture of integrity and professionalism within the family business management structure.
By building a solid foundation of governance, family businesses can overcome the unique challenges posed by the intersection of family and business matters, maintain family harmony, ensure smooth leadership transitions, and promote professionalism and long-term success.
Waleed Alkalash, a certified family business advisor, offers tailored consulting services for family businesses in Saudi Arabia and the UAE.
Don’t delay your strategic planning to sustain your family business’s legacy. Ensure a successful transition and effective communication across generations. Contact today to book your consulting services.