Everyone knows that emotionally invested board members are vital for sustained growth. However, including family governance adds another layer of challenges to your brand. One of the first moves is by reevaluating your continuity planning efforts to include more responsibilities. However, you will still need to figure out who you want to incorporate into your family business.
Before seeking out fresh talent for your board, you may need to redefine existing roles. Utilizing your current executives more efficiently can help prevent expanding membership too quickly. Positively People can help by providing reliable family business succession planning. Read on to learn about some of the many lessons we have learned over the years.
How Owners Contribute to Decisions
When you’re expanding your brand, power typically flows from family members to directors. That partnership should have directors working in the owners’ best interests and vice versa. Sometimes the board will branch out to include outside members, and that is where many firms begin to see conflict.
When you’re growing the board, you’ll want to focus on including people with skills that are currently missing. Clearly defining the duties of each new director also helps prevent miscommunication. During these times, it’s wise to choose a family business advisory team that can help keep your best interests at heart.
Don’t Overburden the Board
Every brand goes through challenges when they’re working on expanding their focus. It doesn’t take long for some directors to be taking on too much. These issues can be quite common, so you don’t want managers that are unsure of their role each day. Instead, sharing responsibilities or dedicating committees can ease the collective burden.
Some firms may restrict the duties of those that are outside of the family. The best thing every member can do is to understand the brand better. Even with limited powers, new additions may have a lot to offer the company. Make sure everyone’s voice is heard with family business consulting.
Do Your Directors Feel Like Owners?
The typical family brand ensures that outside directors don’t have much power. However, many are often strapped with owner-like responsibilities, so it can lead to conflict. An effective director is one that spends more time learning than teaching. Their skills can fill gaps within the company, so it’s important that they understand your brand fully.
When including new directors, remember that their role is one of stewardship. They are there to keep family members on track to encourage continued growth. All directors should receive collective and independent feedback just as other employees do. Make sure your firm maintains a clear path forward with family business succession counselors.
Don’t Fear Independent Directors
It’s common to install friends and family members into director roles. However, they often aren’t enough to offer the brand the focus it deserves. Some families are wary of inviting people in without relation in fear of losing their ownership. Such narrow thinking only halts your brand’s progress instead of improving it.
These “outsiders” can help provide a lot of insight because they aren’t as financially or emotionally invested. However, advice should be heeded and not only heard to have positive change happen. If you have a fear of independent directors, recognize which type you need the most. That way, you aren’t trusting those who don’t offer immediate benefits.
Define What Future Directors Will Accomplish
One reason why next-generation leaders fail is because they don’t have a clear direction. The original directors step down, leaving the new team to scramble and figure things out. Instead, defining what future generations will take on will help them invest in your firm’s success.
Another way that companies avoid these missteps is to have planned directors observe. By including them in a non-participatory role, they can see what is required. No matter their background, their inclusion should serve a purpose. Allow our experts to assist you in charting your company’s future.
How Many Outside Directors Should My Family Business Include?
Successful brands will find a balance between family influence and independent members. That is where you’ll find the magic ratio of outsiders to your existing governance board. There is no way of understanding the correct answer ahead of time, so you’ll need to discover this through the existing board, including crucial abilities and experiences.
Widening who works on behalf of the shareholders is wise. Many groups balance corporate experience with a specific number of family members. The most prominent mistakes are expanding directors too soon and overlapping responsibilities. Meet with our experienced advisors today to discover the best solution.
How Invested Should Outside Directors Be?
Another pitfall of many family brands is balancing director compensation for their participation. While they may not have much power, they still need to feel valued. Unfortunately, some firms feel more like a dictatorship with a family CEO reigning supreme. This kind of attitude leaves many directors wondering why they are there.
Other companies may compensate their directors too much, stagnating their growth. It’s best to allocate more resources towards production than to oversee operations. Term limits in which independent directors serve will also need to be defined.
What Are the CEO’s Dynamics?
In publicly traded firms, the CEO and executives are on an even playing field. A family-based CEO, on the other hand, can complicate matters. Firms balance these dynamics by offsetting family executives with outside members. Either the CEO is independent or the directors, but not both.
Other companies may have a separate governance board that offers advice. These members don’t have much power, but they do influence policies. Independent CEOs may provide what the firm needs to have success.
Make the Most of Your Family Governance Boards with Us
Leading a successful company is challenging enough without the complexity of family. That doesn’t mean that you are doomed to make the same mistakes as other firms. Instead, planning for your brand’s future doesn’t need to feel impossible. We offer professional advice and guidance to companies across many industries.
Even the best directors don’t know everything without support. Contact Positively People for practical solutions and advice today.
