Smart Governance

Background and Circumstances

The Evergreen* Family Company, a mid-sized manufacturer of sustainable home goods, was founded 75 years ago. The business thrived under the leadership of the first generation, expanded during the second generation, and is now transitioning to its third generation of family leadership.

As the business evolved, so did the family dynamics. The third generation consists of 12 cousins with varying degrees of involvement. Some eager to lead, others are content with passive ownership, and a few pushing for new, innovative ideas.

With the increasing number of stakeholders, the family faced several challenges:

• Prolonged Decision-Making: Contentious and unproductive family meetings 
• Unclear Roles and Expectations: Responsibilities among family members were ambiguous - do all shareholders have a minimum responsibility? What is that?
• Diminished Cohesion: Without a clear structure, trust began to erode, and disagreements began fracturing the family’s unity

The Decision to Establish Governance

With some advice from experienced family businesses, the Evergreen family decided to bring on an external advisor to help them formalize a governance structure that would help establish more effective decision-making, preserve family harmony and position the family for continued growth. The advisor guided them through a three-step process.

Phase 1: Assessing Needs and Setting Objectives

The advisor's first step was getting to know the family members individually and as a whole. Since each family business has unique circumstances and challenges, the exact structure can depend on the family members’ individual goals and visions for the company and how they can best work together.

‍Phase 2: Designing the Governance Framework

The Evergreen family’s advisor guided them to start with these three main components for their governance structure, which are common across family businesses and can be tailored to a particular family’s exact needs.

• Family Constitution: A formal document outlining the family’s shared values, mission, and guiding principles for decision-making.
• Family Council: A representative body of family members tasked with addressing family-related issues, educating future generations, fostering unity through gatherings, and being the intermediary for family feedback to be relayed to the Board.
• Board of Directors: A mix of qualified family members and independent board members to oversee the company’s strategic direction.

Phase 3: Implementing a Digital Operating System

To reinforce the new structure, the advisor introduced a digital operating system, Trusted Family. This centralized platform served as a one-stop resource for:

• Document Organization: Housing the family constitution, meeting minutes, policy documents and more.
• Communication: Providing a space for discussions, announcements, and feedback.
• Events Management: Simplifying the planning, scheduling, and coordination of family gatherings and business meetings.
• Education and Training: Offering a place to house and manage resources to prepare the next generation for leadership roles.
• Decision Tracking: Recording votes and decisions to ensure transparency and accountability.
• Secure Vaults: Securely distribute individual family shareholder documents in a private manner.

By integrating technology, the family could overcome logistical hurdles, maintain consistent communication, and enhance engagement across generations.

Outcome and Long-Term Success

The establishment of a formal governance structure and the adoption of a digital hub transformed the Evergreen Family Company.

Key results included:

• Improved Decision-Making: Decisions became more structured, transparent, and timely, reducing conflicts and fostering trust.
• Enhanced Unity: The family council created a safe space for discussions, strengthening relationships and a place to align on shared goals.
• Empowered Leadership: Clearly defined roles and responsibilities allowed family members to focus on their strengths, while independent directors brought fresh perspectives to the board.
• Future Readiness: Trusted Family ensured that all family members, regardless of their level of involvement, stayed informed and engaged, creating a pipeline of prepared future leaders.

By addressing their inflection point with a thoughtful governance structure and innovative tools, the Evergreen family not only resolved their immediate challenges but also laid a robust foundation for continued growth. 

_{*The names and details in this case study are entirely fictional and used for illustrative purposes only. Any resemblance to actual families, businesses, or individuals is purely coincidental and unintentional.}