Family Enterprise Strategy: Top Five Benefits of An Independent Board
Governance in the Family Enterprise
Governance can be an intimidating word for a lot of enterprising families. For starters, opening a conversation about governance often raises a relatively important question: what does it entail? By definition, governance exists on a continuum, so it does not always demand a massive undertaking. In fact, a lot of what we already do to encourage structure, create oversight, and build accountability is governance. Agendas and meeting minutes? Risk assessment & management? Contingency planning? Strategic planning? All governance.
The Board of Directors/Advisors
While governance does not have to be a fundamentally challenging undertaking, one of its more comprehensive expressions comes in the form of a Board of Directors or Advisors. A strong board with a balance of independent and family members can be an incredibly helpful tool for reducing conflict, creating clarity, and enhancing clear, effective procedures. Often, the benefits reverberate throughout the business and family, and can open doors for deeper conversations. Boards are vital in such a variety of areas that I compiled my top five list of why I think a board is often a really good idea for the family enterprises that I work with.
Top Five Benefits of an Independent Board
1. Formality: A Board enforces formality in your organization. When it comes to communication, reporting, policies, and infinitely more, the process of establishing the board helps to create transparent, agreed-upon mechanisms for getting things done. This clarity also helps everyone feel informed.
2. Conflict Resolution: Establishing a board also works toward creating formal, built-in processes that support efforts to work through conflict as it appears through business activities. Disagreement and differences of opinion are inevitable components of business, particularly in family enterprises. With a board, there is an arbiter to help navigate and get beyond these differences.
3. Decision Making: Related to conflict resolution, formalizing and concretizing decision-making processes is an incredibly powerful tool for enterprising families. With a board, this process is not only clear, it also expands these responsibilities beyond just the family making decisions about the family. Many decisions that families face when it comes to their enterprise can feel challenging and like the stakes are high. For example, in transition and succession planning, choosing which next-gen successor will be the CEO can feel like an incredibly fraught choice. With a board, making these decisions often feels fairer for all involved - across generations and family branches.
4. Accountability: It is one thing to be accountable to your family; it is an entirely other thing to be accountable to outside professionals. Establishing a board puts everyone, and I mean everyone, in position to be accountable.
5. Honest Feedback: A board, by definition, is a bit contrarian. They are there to poke holes in arguments, find lapses in logic, and push you to think through risks. This means giving you honest feedback - there are no "yes men" on a board. Especially as you get more senior in your career, a board is a resource for honest, helpful, and growth-minded feedback.
While a board may not always tell you what you want to hear, it can offer vital perspectives that you need to hear. For enterprising families, the family element can be an exceptional strength. A strong, independent board can work with you to ensure that these strengths are both encouraged and well-utilized.
As you begin a process of thinking about, discussing, and ultimately building a board, it is also important to remember that governance is a process. A board will not appear overnight, but with this ultimate goal in mind those smaller accountability and formalization steps can begin to build governance into your family enterprise in achievable and incremental ways. Whether your board is established next week or next year, introducing any kind of governance into your family enterprise can have sweeping benefits for you, your business, and your family.