Legal Law

Tea "How" Board Development

Why have a board of directors? Why have independent directors on that board? What can the board do for my company? How do we, as a family, develop an impactful dashboard that the family will listen to? How do we find directors? What does a board do that a management team or family advisory board does not?

In my work with family businesses, both as a consultant and as a director in a family business center, I have been asked these questions many, many times.

In fact, the two most frequently asked questions are: “What does a table do?” and “How do I find independent directors?” I usually respond by starting with what research has told us about boards, including that an independent board has often been cited as one of the three essentials found in successful multigenerational family businesses.

But that research only tells us that we should feel positive about building a table. Unfortunately, it doesn’t tell us how. And it’s been my experience with the family business that it’s how it gets in their way, not the lack of desire for a board.

In fact, what I’ve seen the most, particularly in first and second generation family businesses, is a model that supports the whole family on the board or a combination of current family members and advisors or close friends. Because, buried in the question of how, is the feeling that we should trust the people we turn to for advice. It is the most important element of any relationship with an advisor. This is one of the reasons why so many families choose these individuals; they have a history.

Often times when people recognize that their business needs a board, the first step is to focus on skills. For example: we need more than one strategist, how do we find someone with those skills? Skills are obviously important. Smart people, great experiences and relevant education are attributes that we want and can find. But what about trust? Therein lies the challenge because trust takes time.

When it comes to boards of directors, the basic principle for all family business decisions still holds: it’s about values, culture, and fit. Your culture and values ​​are central to the identity of your family business – how is an independent director (a stranger) going to appreciate this? Developed from stories, experiences and rules about belonging to your family, its values ​​and culture have a special meaning and drive the business, the family and its decisions. Your choice of independent directors should be no different.

The process is important and yes, there is a way to find the right managers with the right skills and the right values ​​for your family. After working with family businesses for 15 years, we have learned a few things about culture, fit, and the importance of values ​​on the board. This is work we do more and more for clients and we have developed a very efficient process to find, place and develop independent directors for family businesses. People we know, people with great skills, but most importantly, people who “get it.” They understand the dynamics of a family business. We work to determine what type of person will fit the needs of the company, what attributes are key to making that person or people fit in well with the family and the company, and to make sure these directors understand your values ​​and culture.

However, whether you are conducting your search with our help or on your own, it is important to begin by clarifying the family’s hopes and goals for the business. Any director should be able to support these goals in their role on the board, as all directors serve the will of the owners. Once the owner’s vision is clear, a business and industry analysis is important to discern which skills are most critical in the future.

Where is the business heading? What are the big current or emerging challenges in the industry? Getting clarity on these questions will help you appreciate what skills and knowledge you want from managers to help take your company to the next level.

While combining family priorities and business needs in hiring strong freelancers for your board of directors can be overwhelming, the result is well worth the effort. On your own or with our help, we hope you will adopt this governance model if you have not already done so.

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