A Guide for Family Businesses

The owners of wrayco Industries—two brothers, a sister, and their parents—recently held a meeting in a quiet retreat near their Stow (Ohio) headquarters. Their task: to write a family constitution. The family wanted to come up with a consensus based on their hopes for the future of the $38 million company, which manufactures specialty fuel tanks for construction and other equipment. By the end of the weekend they had drafted a document "to address core business issues that could create conflict within the family long before they actually did," says Brian Gibb, one of the brothers and vice-president of business operations. Says Gibb: "We established standards for employment for family members and determined in broad terms how stock would be passed from generation to generation. The family constitution gave us a living document to reference much as Americans reference our nation's Constitution."

Regardless of the existence of estate plans, legal documents, and trusts, families in business often decide to write a constitution that deals more concretely with the goals of the business. A "constitutional convention" gets the family members who have to share the vision for the company engaged, and engaged people are much more prone to support the guidelines they help write.