A Family Constitution: On paper alone or lived with head, heart & soul?

By SOCH Business Mentors LLP Posted January 20, 2022 in Insights on Family Business

A Family Constitution: On paper alone or lived with head, heart & soul?

A difference to think about. 

Last year, a multi-generational global Indian family business, say *Shah Family shared with us that they had drafted their written constitution with their advisors in a period of a few months but were unsuccessful in implementing the same and at the same time, they were finding themselves lost since there had been no change in their family or the business with this constitution. They needed help! 

*For client confidentiality, the last name has been changed. 

Family constitution development is not the work of lawyers or accountants, with all due sincere respect. They do have a part in the process which is limited to about 5% of their contribution. The remaining 95% is where the difference is. Having a constitution on paper is not the same as living the same with head, heart & soul of the family members for generations. Therefore, constitution development projects can range from a few thousand U.S. dollars to even mid-order double-digit million U.S. dollars, depending on what your goal is. 

When family stewards hear the above, after waiting in pain and worry for years and even in some cases for decades, they simply can’t help but scream inside – Are you out of your mind? Why is the difference of price so much? What is so different? And so on.. 

None of the above questions are unfair. It requires a good deal of understanding. 

Family Businesses who set out to build their constitutions may have one of these two approaches: 

  • First,  a technical approach which is a written family agreement for reference for safety
  • Second  is a head, heart & soul approach which is a written constitution - not just for safety but to live and outgrow every day the family harmony, growth, abundance, and unity for generations.  

This choice of approach makes all the difference. 

When family businesses choose the second approach, it guarantees the family of becoming an unprecedented force that nurtures its family members with love and harmony. At the same time, it empowers the business with the relentless growth in every sphere of business they choose to expand. 

When family businesses understand the difference between the two approaches, they realise that making a constitution is not the result itself. Living the constitution effortlessly and effectively brings the real result of growth & harmony for generations. 

This difference between the two directly impacts the family’s fundamental ability to transform and soar as a successful, prosperous, and meaning-rich global institution for generations to come. 

After weeks of perspective building, the *Shah family realised this difference and found that the written constitution was not enough. They had opted for the technical approach. Currently, we are helping them re-design their family constitution with the second approach, which requires distinguished, mature and accomplished seven mentors backed with a highly-skilled team of nearly thirty-six diverse team members. We are just halfway, yet the impact on the family is undeniably magnificent. 

*For client confidentiality, the last name has been changed. 

Family Businesses that live and die for the growth of their identity, pride, love, and prosperity still lose sight when choosing the right approach for their family business. Let us understand why. 

The reason for the above is in many deep-rooted, unspoken and surprising myths that govern their decisions for not choosing the second approach, especially in our work in the last decade with Indian Family Businesses (Net worth range – USD 300 million – USD 3.2 billion) 

I have listed some of the prominent myths: 

Myth #1: If it is written, everyone will follow it. 

This is a myth. Understanding this myth changes the outcome and mainly saves the family’s hopes, time, investment, and their morale. As demonstrated in the *shah Family, writing it is not enough. It takes people who have to live the constitution to get actively immersed, participate, voice out and let voices of others be felt, understood, and clarified whilst making the constitution. 

At the end of the day, the constitution is only a means to deliver the future that the family cares to create. 

This is the first and foremost myth to break respectfully. 

Myth #2: Because there is so much love and respect in the family, living the written constitution will be easy. 

This is the second and most commonly seen myth in family businesses. This is also one of the key reasons family businesses opt for a technical approach for making the constitution like the respected *Shah family. 

Living out of a constitution is a significant change for everyone in the family. The assumption that what has worked so far will work in the future makes them believe that love can navigate them through all the challenges pertaining to implementing the constitution. This is a myth and usually makes family businesses settle for less. 

Myth #3: Our family is united. We don’t need a constitution now. 

There is never a right time for the constitution. Family Businesses who understand this take proactive steps to make their constitution as early as their second generation. This is because it is more effective, long-term and easy to implement change from the start. 

The highest affinity in the family to make a constitution is in its second or utmost the early third generation. Usually, after this, making one takes longer durations and more time, money, and resources. 

Despite being halfway, a radically new synergy developed when the *Shah family chose the expert-led systematic process (head, heart & soul approach). This has already enabled the execution of pivotal business decisions faster, smoother, and practical, helping the family enjoy harmony and grow at sustainably compounding levels.