In family business literature, I have read with alarm that it’s fine to have family branch representation on the board or on the family council. There are several reasons why families should move away from family branchism. The most powerful examples are found in family disagreements and lawsuits. Take the Demoulas Market Basket family, for example. They had branch representation and their disputes ran along branch lines even on the board.
The challenges of defining a branch
Families define a branch in many ways. Usually branches are determined by breaking the family into units defined by a certain generation, such as G2s and their descendants or G3s and theirs. The further down the family tree that you start defining the family branch, the more branches you have to make room for.
Creating a branch policy for membership on the board or family council may create a more harmonious environment in the short term because a family doesn’t have to have the difficult discussions around qualifications and expectations, but it also creates a huge downside: entitlement, under qualified directors or council members, a missed opportunity to encourage all representatives to speak and get to know all family members (rather than just their branch), and the family loses on development opportunity to meet the qualifications of the role.
Family branch mentality breeds entitlement
I have heard tales of families who select their next CEO based on which branch’s turn it is to serve. Unless each branch has an equally highly qualified candidate for CEO, the company is in for some rough times. Not only is the family missing the opportunity to pick the best person for the job, it also tells the employees that merit doesn’t matter – having the right last name is enough. That sets up the family member for an even more challenging task as they take on their leadership role. The same is true for family directors and family council members when families elect branch representatives. They may be selecting the most qualified family members in those branches, but without established expectations, and the willingness to elect no one to the role unless there is someone who can meet the expectations, then a branch focus will lead to entitled and under qualified executives, family directors or council members.
Avoiding entitlement and family branchism
Those who are most qualified should serve on the board, or lead the family in other ways, regardless of which branch of the family they belong to. Along with the hard skills like business acumen and a strong financial background, family director qualifications should also include those softer, more elusive, skills like trustworthiness, involvement in family governance, as well as the requirement that the family director represent the whole family at all times. If a person does not meet all of the soft and hard skill requirements, then the person is not qualified to serve.
Representing the whole, not the branch
It may seem harder to represent the whole family’s interests, rather than just the branch; but it makes things easier in the long run. The family avoids dividing along branch lines on any given subject. The key to representing the whole, rather than just a part, is to have a consistent and transparent communication plan, a clear and repeatable change process, and inclusive decision making. It also helps to promote family interaction with all directors and family council members. All of these practices promote trust and build engagement in the whole family, and the need to focus on family branch falls to the wayside. Branch representation is an easy way to avoid some difficult conversations now, but it can lead to huge downsides in the long run.