Importance of Family Business Constitution.
A family business constitution is a written agreement between family members that formalizes the norms that govern softer elements of the business. The advantage of a family constitution is that it ensures clarity and transparency and families know what to do when disagreements arise.
Its contribution to Family Businesses Globally, Africa region and Kenya.
71% of family businesses in Kenya have not adopted FBC. (According to PWC). In other countries like Germany 87 % of family businesses firms with a constitution do report that they will eventually come to a consensus even when they have differing opinions. This is only the case in 71% of families without a constitution. Regarding emotional ownership, 93 % with a constitution say that the family business is an important part of their life, in relation to 85% without a constitution (KPMG 11July 2017)
Family businesses are pillars of the world economy and account for more than two-thirds of all companies globally providing between 50% and 80% of all employment.
Challenges: Family business constitution
Lack of establishment of framework for leadership in family constitution:
This happens in cases where the current leader of the business is nearing retirement or is no longer able to play an active role in the business.
Not establishing a mechanism for resolving disputes or conflicts.
In any family business, conflicts are bound to arise from time to time. But in a family business, those conflicts can be particularly tricky to navigate, as they often involve personal relationships as well as business issues.
A family constitution is an essential tool for any family business. By defining roles and responsibilities, establishing a decision-making process, creating a framework for leadership succession, .and providing a mechanism for resolving disputes, a family constitution can help to ensure the long-term success of the business.
To address these challenges, that’s where IFFB comes in. As your trusted advisors, we can help your family business develop a business constitution and implement at every stage. No matter where your business is on its journey to success, we can be at your side with the insights and solutions you need to stay fit for growth and moving forward at the right pace.