From Paper to Practice to Platform: How to Turn Governance Best Practices into Reality
Successful family businesses create governance structures that facilitate communication and decision-making while adhering to universal standards of integrity, equality and ethical conduct. They also employ good governance practices that identify what is best for the business and its stakeholders while ensuring accountability, accuracy and control.
Agreeing on a governance model and putting it on paper is a challenging first step for many family businesses, but refining and implementing that framework is often even harder. A recent survey conducted by accounting firm KPMG indicated that only 50 per cent of its family business leader respondents were satisfied with their current governance structure, and the remaining half believed that change was needed to achieve greater growth in their organisations.
In many cases, the key to developing, implementing and consequently benefiting from good governance practices lies in how a family business and its shareholders interact with the governance system itself. Platforms such as Trusted Family leverage the power of digitisation and technology, offering distinct advantages over paper-based and other legacy documentation systems.
A System That Grows With Families
Developing a governance system is complicated enough, but adapting it to accommodate a family business’ generational changes exposes the impracticality of paper-based and other outmoded systems and processes. At their core, family governance structures should be tools to help families communicate, solve problems, and evaluate how business decisions will affect the family and vice versa. But paper-based governance systems lack the fluidity to evolve with a family firm’s changing dynamics, ultimately adding little to the generational cohesion needed to keep family businesses operating beyond the founding generation. It’s become a discouraging statistic that more than a third of family businesses do not survive the transition from first to the second generation, and only 10 per cent survive past the third generation.
Moreover, as the family grows and an increasing number of members are involved in the business, an over-reliance on paper or unsecured, publicly available communication and file sharing applications increases the risk of a sensitive information leak. A recent Deloitte survey on the financial impact of data breaches highlights the severity of the problem: on average, family businesses globally have 25,500 records breached through phishing incidents that target employees with access to confidential materials.
Trusted Family’s robust cloud platform provides an all-in-one governance hub that grows with families and supports them at every stage of their journey. It allows customisable access to information with a best-in-class security framework while supporting family cohesion through communication and sharing.
Whether implementing governance practices or undertaking managerial activities, family firms are routinely confronted with inefficiencies in their paper-based decision-making processes in which information constantly has to be tracked, compiled, reformatted and redistributed. Version control issues and the inability to quickly access the most up-to-date information can delay key decisions being made and implemented.
The same problems exist when family firms rely on a variety of communication channels and unclear workflows. A recent Deloitte Next-generation family business leaders survey singled out communication and decision-making platforms at both the family and business levels as critical for the success and longevity of a family business, especially in times of change and disruption. And recent events connected to the COVID-19 pandemic have further demonstrated the importance of a centralised communication hub and a decision-making process that is responsive and adaptable.
Trusted Family provides a convenient point of reference to facilitate easy communication and decision-making between different family members in one consolidated platform that select members can access at any time. The centralised platform includes the tools families can use to make strategic decisions that are efficient, collaborative and timely.
The Importance of Stakeholder Buy-In
Enforcing governance rules and structures can be challenging for any business, but particularly for family-owned businesses that often have informal relationships and practices. There can also be significant resistance to the formalisation of these relationships, and a reluctance to articulate the family values and rules that serve as the foundation for good governance.
However, simply getting stakeholders to agree on what is important for the business and its family owners can be the greatest obstacle of all. PwC’s 10th Global Family Business Survey found that only 58 per cent of family members share similar views about the direction of their company, and 21 per cent indicated they had no formal mechanisms in place to deal with potential areas of disagreement.
One of the ways in which good governance can be more easily and effectively formalised and implemented into a family business is by employing platforms such as Trusted Family that provide transparency around rules and regulations, as well as 24/7 accessibility for all members. The Trusted Family platform gives all shareholders a voice, helping families identify and agree on the principles they wish to follow.
Governance and Continuity
Despite playing an integral part in a family business’ continuity, a recent survey of family business CEOs indicated that 70 per cent did not have a succession plan in place. Many of the hurdles family firms face with regard to succession planning can often be traced to poor communication among key stakeholders and low motivation among next-generation members. However, next-generation members often see technology as one of the three most important drivers of change for their family’s business, and in a recent PwC survey, 64 per cent of next-generation respondents felt that digitalisation, innovation and technology were areas in which they could add value.
Trusted Family’s governance technology not only facilitates engagement among a company’s stakeholders but also provides a modern portal that connects with the digital sensibilities of next-generation family members. The platform serves to empower a family firm’s future generations while providing them with a tool as forward-looking as they are.
From Paper to Practice to Platform
Trusted Family’s governance platform is an ideal solution to the professional and personal challenges family businesses often encounter when developing and implementing a governance framework. It takes the intangibility out of many governance systems and helps to simplify and optimise every aspect of a family firm’s operation and ownership structure. Making the often-daunting task of enforcing governance best practices in family businesses quick, easy and effective, the Trusted Family platform facilitates a smooth transition from paper, to practice, to platform.