Why Some Family Constitutions Fail – Family Business Magazine (2021)
Vijay Sathe, Alfredo Enrione and Donna Finley
“Family constitutions, sometimes called family charters, differ in details but generally specify the family’s values and vision, criteria for family member employment and ascent to leadership, and the rights and responsibilities of family members involved in the business and those who are not. Family constitutions are popular and have served many family businesses well over the years.”
But some family constitutions fail to deliver the benefits the family hopes for.
In all of the cases we studied, the family business leader initiated the process of creating a family constitution with the help of an external adviser or facilitator. The document was developed in consultation with the family members who ultimately ratified it.
As we dug deeper, we discovered that what was described as “consultation” involved dramatically different levels of engagement and openness. In the less successful and failed cases, family members were informed about the purpose of the constitution and what it contained and were asked to review and comment on the document before it was signed. If there was discussion among family members, it was perfunctory and did not surface any tensions or controversies.