Creating a Family Constitution: Your Roadmap for Generational Success

A family constitution, sometimes called a family charter, is a written document that articulates the family’s shared values, vision, and agreements about how they will work together in the family business. This foundational document provides invaluable clarity that helps families navigate challenges and preserve harmony across generations.

Why Family Businesses Need a Constitution

As family businesses grow and evolve, informal understandings often become insufficient. A family constitution provides:

Clarity and Transparency
Explicit agreements prevent misunderstandings about expectations, policies, and processes. 

Conflict Prevention
Predetermined policies guide decision-making during emotional situations.

Vision Alignment
Shared articulation of values keeps multiple family branches aligned despite different circumstances.

Continuity Across Generations
Written documentation preserves family wisdom as leadership transitions occur.

Core Components of a Family Constitution

Family Mission and Values
A statement of core principles and the purpose of your family business.

Ownership Philosophy
Clear agreements about stock ownership, transfer restrictions, and valuation methods.

Employment Policies
Guidelines for family member employment including qualifications, compensation, and performance evaluation.

Leadership Succession
Processes for identifying, developing, and selecting family business leaders with clear criteria.

Governance Structures
Definition of family councils, boards, and other governance bodies including their roles and procedures.

Conflict Resolution Mechanisms
Agreed-upon processes for addressing disagreements constructively.

Communication Protocols
Standards for how and when family members will share information and make decisions.

Education and Development
Commitments to preparing next generations through education and mentorship.

The Process of Creating a Family Constitution

Initiate the Conversation
Begin with family discussions about why a constitution would be valuable.

Engage a Facilitator
Consider working with a family business advisor who can guide the process objectively.

Gather Input Broadly
Include perspectives from all family branches and generations to ensure buy-in.

Draft Iteratively
Create initial drafts, circulate for feedback, and refine through multiple rounds.

Build Consensus
Work toward agreements that all family members can support.

Formalize and Ratify
Have family members formally commit to the constitution through signatures.

Review Regularly
Schedule periodic reviews to assess whether the constitution remains relevant.

Bringing Your Constitution to Life

A family constitution is only valuable if it actually influences behavior:

• Reference it regularly when making decisions

• Integrate it into onboarding for new family members

• Link it to shareholder agreements and other legal documents

• Measure whether actual practices align with stated principles

• Celebrate when the constitution helps navigate challenges

A well-crafted family constitution becomes a living document that guides your family business through both prosperous times and challenging periods, preserving your family's values and vision while providing structure for sustainable multi-generational success. 

To learn more about the Academy of Family Business, our curriculum and our coaches, please email us at: info@myAFB.org