Go Get Yourself A Board
It is hard to condense family business continuity advice into a single sentence–one imperative that can galvanize a complex system toward the goals of continuity through generational transitions. But we sure try–and as our co-founding partner Kelin Gersick implored LGA advisors in our recent gathering in Portugal: “if you get one thing right…get the board right.”
Getting the board right is essential for the family enterprises we help, whether or not they already have a board. This is not because either the families or the businesses love extra layers of bureaucracy, agenda-setting, and meetings to determine company strategy. Rather it is because a well-constituted board helps bring all the neglected components of a family enterprise to life.
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Take a problematic generational transition, for example. In a typical (and board-less) controlling ownership structure, the executive functions of the business, the concentration of ownership, and the running of family affairs tend to be concentrated in one individual. If generational transition has not been planned well, it will happen out of necessity–and it will happen all at once, potentially overwhelming the whole family enterprise system, with unpleasant results for everyone involved.
Now add a board to the equation. Its mere presence means there are governance structures and business policies in place–there is a separation between executive functions and owner representation, even if only on paper. This makes it easier to split them up in the future. There are processes to enable the flow of information and strategic decision-making already in place–these do not need to be set up in a hurry. And there are leadership positions that have already been filled, making it less likely that the family enterprise will experience a leadership gap.
In other words, the very action of constituting a board is a contributor to family continuity. Defining it enables the enterprising family to cultivate its unique ownership vision, craft a robust long-term strategy, embrace accountability, and agree on a decision-making process that allows them to remain agile and decisive. Of course, having a board does not solve every problem, nor does it guarantee continuity. But it does provide the appropriate context to address continuity challenges and resolve underlying problems. Done right, it forces open the right communication channels and puts in place the right processes.
So if you care about continuity in your family enterprise, go get yourself a board. In doing so, consider the following key elements:
- Clearly define the role and scope of the board;
- Ensure the board (and all its directors) understands and aligns with the owners’ vision, to whom it owes its duty; and,
- Ensure the board has appropriate leadership.
You can get one here, of course, and your LGA advisor will bring decades of experience in helping families ensure continuity by building the right governance structure. But regardless of who helps you build your board, make sure it’s a structure fit for your broader family enterprise vision. And if you get one thing right, make sure you get this one right.
Greetings from Lisbon,
Your LGA team.
PS: Already have a board? Make sure you get the most value out of it–check out our board development programs and make your board more effective for your enterprise and its owners.
