How Family Boards will kill Family Businesses; make sure the right people are on your board.

There are two different approaches to having a board. One approach is to have people on your board that have expertise in the business or related fields. Related fields often are customers that use your products or people from industries that help create visibility on where your market might be heading. A board comprised in this way is most helpful to the CEO in navigating the challenges of the business. Another way of comprising a board is the friends and family approach. A board like this ignores expertise or relevant experience and instead revolves around the family and friends they like to have around. This type of board is focused on family needs and how the company has to provide the means to fulfill those needs.

The friends only function to making sure there is a majority on the board for any vote. These are the two extremes and any combination can be imagined. The times that the family and friends approach also adds expertise is highly desirable but seldom the case.

In a company I ran, the patriarch of the family was the chairman of the board. This gentleman was acting CEO until he was in his 70's after which he relinquished the reins and hired a CEO. He remained chairman of the board and kept an eye on the business best he could. He had two children, neither one having any interest or expertise in the business but one of the children became a member of the board anyway. This was in the hopes he would warm up to the business and become interested in it. It was an embarrassment. It didn't work out at all and he never understood any aspect of what was discussed at the board meetings. It was obvious to everyone except the father that he would never be capable of running this company.

This went on for years before finally that father woke up and asked him to leave the board. He was replaced with a highly competent CEO from a multinational manufacturing business. This new board member was amazing and extremely capable. It transformed the board and energized it. It was amazing to see how everyone in the company knew of this change and how it initiated a change in culture company wide. Suddenly, everyone knew this business was being run as a business, not a family piggybank hobby club. The change in attitudes was immediate and palatable.

I was CEO at the time and spent a lot of time with the new board member. From my perspective, it was a brilliant move. I had frequent conversations with the new board member and he was instrumental in guiding me and the company through the 2008 crises. Without a strong board, the company might not have survived.

If you have a closely held company, how is your board? Are you on the friends and family plan or do you have an expert board? If you want your company to thrive, you might want to take a look at your board. Having captains of industry on your board is probably one of the best investments you can make in your company. Set clear mandates for your board members and reevaluate them periodically. As companies change, so should boards. They can be one of your best resources.

With your success in mind,

The Miami Turn Around Group

Is your business under performing? Great! Sounds like there is an opportunity for improvement! We hope you like our publications, they always focus on basic, down to earth business principles. Get these right and your business can't help but thrive. Are you ready?