Why Families Should Compensate Their Family Council Chairs

Many family councils are struggling to address the challenges they’re facing. Many feel pulled between competing agendas—managing all the short-term and long term work of the family council.

For a family council, short-term work includes planning events like retreats for the family and the annual family council meeting.

But long-term projects are equally important, and often get pushed to the side when the family council is faced with the immediate need to find a venue for an important meeting happening next month. Long-term agendas require thinking strategically about where your family needs to go, how you’re going to develop the next generation, and how you’re going to manage the succession of the board and other leadership positions.

Often a family will get good at the short-term immediate agenda, but they never have time to address that longer-term issues.

The dangers of under-investing in the family

There are a couple reasons why this is difficult for families. First of all, not having long-term strategic conversations built into each year’s agenda makes it difficult to make it a priority.

But the biggest problem is that family businesses often under-invest in their families. They’re not investing as much in the family as they do in the board.

A common mistake is not paying somebody to oversee the agenda. If the family council chair is squeezing in unpaid work for the family council around other commitments, he or she ends up not having time to take a step back and focus on strategy. This is not a job that you can do part time after you get home from a 40 or 50 hour a week job.

Family council chairs have some pretty unsavory responsibilities, including managing disgruntled family members and responding to them in a professional way. There’s also increased accountability if you’re getting paid for the work, and the family has some recourse if you’re not getting your work done or you’re not attending well enough to the not-so-fun tasks.

If you do compensate your family council chair, then the family can rely on that individual and not feel guilty that they’re doing all this work and not getting paid.

Benefits of paying a salary to the family council chair

  • The family is better able to meet short and long-term agendas
  • The family council chair can be held accountable
  • You have a point person to do all that hard work
  • You’re able to be more strategic as a family
  • Nobody feels guilty that you have one person doing it because they’re being fairly compensated

How do you decide how much to pay somebody?

Step back and look at the scope of the family council chair’s responsibility. Don’t look at the specific task they’re doing. Look at what they’re responsible for. If you haven’t been paying them up to this point, what they’re doing may not reflect the full scope of their responsibilities.

Look at all the things that need to be done to address the short-term agenda, the annual list of tasks necessary to hold smoothly-run meetings, implement policies and so on. Step further back, and think about what you have to do strategically as a family to be a good partner with a growing business. For example you need to develop a Next Generation program, or you need to cultivate a deep bench of family directors. Overall, you need to increase the stewardship capabilities of the family.

Does the family council chair’s job look familiar? In many ways, the council chair of a family business performs similar functions to a human resources person at a corporation.

When you scope out all the work that’s being done and that needs to be done, you can then estimate how many hours a week it will take to get this accomplished. Look at the HR department in your company to identify a position with a similar set of responsibilities, and use that person’s role as a benchmark for the family council chair position. Now you have a reasonable estimate for what a fair salary might be, and you can reduce it if the chair is not working a full 40 hours a week like a comparable HR employee might.

Running the family council in a successful family business is a job. Having a dedicated professional in this role is crucial to the success of the business and to ongoing harmony within the family. If you want the family’s needs to be that person’s top priority, why not compensate them? Your return on investment will be immense.

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