Stewardship Masters International, Inc.
Bringing Peace, Order And Clear Leadership to
Your Family Business
Strengthening Families | Stabilizing
Enterprises | Sustaining Generations
SMI 9-Step Family Governance Framework™
Creating a family business governance structure is about
separating three things that often get tangled:
Family- Ownership- Business Operations
Family enterprises rarely fail because of a lack of wealth.
They often struggle because family relationships, ownership responsibilities, leadership succession, and business operations become intertwined without clear structure, communication, and accountability.
At Stewardship Masters International, we believe governance is about far more than protecting assets.
It is about preserving family unity, stewardship, purpose, leadership development, and legacy across generations.
Our 9-Step Family Governance Framework helps families separate and properly align three critical dimensions of every successful enterprise:
Family • Ownership • Business Operations
When these dimensions are properly governed, families are better positioned to preserve relationships, develop future leaders, steward wealth responsibly, and sustain the enterprise for generations.
The SMI framework provides a practical, step-by-step process that transforms governance from a complex challenge into a structured pathway for long-term family success.
Below is our 9-step framework used in our SMI's Family Business and Corporate Governance workshop.
STEP 1:
Clarify the Family Purpose, Stewardship Vision, and Multi-Generational Legacy
Before creating governance structures, the family must first define its purpose, values, responsibilities, and long-term vision.
Effective family governance begins by answering a fundamental question:
Why has this family been entrusted with its resources, influence, relationships, opportunities, and enterprise?
Governance is not primarily about preserving assets. It is about preserving purpose, values, stewardship, unity, and responsible leadership across generations.
Key Questions
• What is the family’s long-term purpose and vision?
• What are we ultimately trying to preserve, build, and become across generations?
• What responsibilities accompany the resources and opportunities entrusted to our family?
• What values and character traits must remain non-negotiable regardless of wealth or business success?
• Are we building wealth, legacy, community impact, or all three?
• What contribution do we want our family and enterprise to make to future generations and society?
• How will future generations be prepared to become responsible stewards rather than entitled
beneficiaries?
• If the business were sold or no longer existed, what enduring values, principles, and legacy would
remain?
Expected Outcomes
• Family Purpose Statement
• Family Stewardship Philosophy
• Family Character and Values Constitution
• Multi-Generational Vision Document
The Outcome
These foundational documents become the family’s North Star, guiding governance decisions, leadership development, ownership responsibilities, wealth stewardship, succession planning, and legacy preservation for generations to come.
STEP 2:
Separate the Three Circles
Family businesses operate in three overlapping systems known as the
Three-Circle Model developed by Renato Tagiuri and John Davis.
The Three-Circle Model Illustrates the interconnected relationship between family, ownership, and business systems within a family enterprise. Understanding these overlapping dynamics are essential for designing effective governance structures and long-term continuity.
STEP 3:
Create the Family Constitution
The Family Constitution is the foundational governance document.
It typically includes:
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Family mission and values
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Ownership rules
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Employment policy for family members
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Conflict resolution processes
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Succession philosophy
-
Dividend policy principles
Think of it as the social contract of the family enterprise.
STEP 4:
Establish a Family Council
The Family Council manages family issues separate from business operations.
Responsibilities:
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Educating the next generation
-
Preserving family culture
-
Addressing family conflicts
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Communication between family and board
Typical size:
5–9 family members.
Meeting frequency: Quarterly.
STEP 5:
Form a Shareholder Governance Body
Ownership must be governed independently from family emotions.
Create a Shareholder Assembly or Ownership Council.
Responsibilities:
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Ownership policies
-
Dividend policies
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Major capital decisions
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Appointment of board members
This protects the company from owner confusion.
STEP 6:
Create a Professional Board of Directors
A strong board ensures the business operates professionally.
Composition usually includes:
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Independent directors
-
Industry experts
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Selected family representatives
Responsibilities:
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Strategy oversight
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CEO accountability
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Risk management
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Performance monitoring
Many successful family firms use majority independent boards.
STEP 7:
Define Family Employment Policies
One of the biggest sources of conflict in family firms is unclear hiring rules.
Define policies such as:
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Education requirements
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Work experience outside the family company
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Merit-based promotions
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Compensation guidelines
Example rule:
“Family members must work 3–5 years outside the company before joining.”
STEP 8:
Create a Succession Planning Process
Succession should be a system, not an event.
Develop:
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Leadership pipeline
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Successor evaluation criteria
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Leadership development programs
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Transition timeline
Family businesses that plan succession 10–15 years ahead tend to survive longer.
STEP 9:
Establish Conflict Resolution Mechanisms
Conflict is inevitable in family enterprises.
Create structured mechanisms:
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Family mediation process
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Advisory board arbitration
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Third-party governance advisors
This prevents disputes from destroying both family unity and the business.