Family offices can help prevent generational fractures and preserve wealth

• Family governance guidelines from Dubai
• Mitigating family fragmentation with timely recalibrations
• Sustainable interplay between power and family empowerment

The gradual fragmentation of families is almost inevitable as they grow from one generation to the next, leading to decreased alignment in matters related to relationships, business and beyond. Formalising family matters to best serve emerging needs, expectations and activities, as well as keeping the family together, has been a global practice for decades.

Family governance guidelines from Dubai

The Dubai Centre for Family Businesses recently submitted its Governance Guidelines for Families in Business at the Dubai Chamber of Commerce that states: “Conflicts in family businesses are rarely caused by poor business performance. Most conflicts arise because the family owners perceive that their needs are not met. Conflicts also surface when situations are unclear or not properly understood. The management of these conflicts becomes key to the survival of both the business and the family.”

Mitigating family fragmentation with timely recalibrations

As families expand across generations, the solution to fragmentation lies in recalibrating family dynamics, adapting and realigning goals, roles, responsibilities and activities within the familial context. This process involves the curation of fitting structures designed to stand the test of time.

Family governance practices, in this context, also offer an opportunity to understand and shape distinctive family cultures, enabling current leaders to withstand internal and external impacts and risks, all of which the family must weather. These may also include not just internal conflicts but also extended-family upsets and affairs. A multigenerational framework can ensure a family’s enduring continuity and achievement across different endeavours.

Family governance is designed and guided by a family organisation or entity, typically a single-family office. It is a fine balance of governing control by the elders, seeking structure and finding fitting rules of engagement. It is power-holding and power-giving, proposing inclusive family decision-making that acts upon the family essence and long-term value creation and preservation.

Family governance presents a ‘sense-making’ and ‘meaning-making’ journey for family members, during which they can fuse their family and personal experiences to shape future generations. It involves integrating traditions, values, and best practices to create overarching narratives that family members can use in their own journeys.

Sustainable interplay between power and family empowerment

Family members and their ‘familyness’or the culture of cooperative action and the willingness to talk with one another, require engaging, educating, preparing, and planning with the family members. To spearhead family activities, they need to understand and appreciate each other’s talents, individual motives, formational experiences, family’s value framework, and the significance of various activities they participate in or those curated for them by their family office.

Family culture and family rules of engagement should be recognised and agreed upon. They decide what’s allowed, incentivised, and tolerated within the family, using best practices and traditions from previous generations as reference points and foundations, and exploring what the new elements are.

These decisions are also informed by the current family leaders, the family’s character, and a host of factors. Family leaders can reduce the risk of members leaving the fold, and minimise the opportunities for exits, the associated emotional repercussions and other knock-on effects. Creating positive reinforcements and reward systems for generational cooperation, and discussing difficult dilemmas or trilemmas contributes significantly to effective family governance practices.

Communication, transparency, fairness and consensus-seeking approaches are the recipe for a robust family governance framework. Key aspects for long-term family success include clarity on roles, responsibilities, employment, trust, harmony and stability, and building resilience.

Transformational tools that include a family constitution or charter, and family council, with adequate representation from family members can benefit the family, business, and other activities of the members and shareholders.

Different types of engagements, like family workshops, retreats, social and even traditional and ritual engagements, and next-generation group activities, including enjoyable family and business-related education, can foster unity and understanding. Annual or more frequent family assemblies and family council meetings may include separate meetings for the family owners and principals (owner-level engagements), family shareholders, board, and any non-family management, depending on the composition of the board and business structures.

Planning and implementation of the connected legal, financial, cultural, and other structures preserve and maximise the family legacy.

Family governance involves intentional, gradual, and purposefully-prepared change for the family members, varying in stages based on family characteristics. This complex process and evolution for the family members, requires reflection, frequent re-evaluations and recalibrations.

Embracing progress and setting progressive family governance goals during the family journey is crucial. Family governance is critical for business families to navigate change while keeping their family fabric intact and thrive.

Zita Nikoletta Verbényi is the founder and legacy aesthete at The Legacy Atelier™, and she also sits on Wealth & Society’s Global Advisory Board.