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Prosper Across Generations®

Common Independent Director Assumptions

For years we have relentlessly urged family firms to add independent directors to their boards. The value for strategic thinking and succession process reinforcement is beyond calculation.

But board discussions are not always easy. The greatest challenge, we find, is the set of assumptions independent directors, coming from non family firms, bring with them to the boardroom. The most troubling are the following assumptions about family business.

  • Not highly profit centered
  • Use long term orientation to excuse current performance shortfalls
  • Soft on people
  • Lack management discipline
  • Inadequate sense of urgency
  • Too concerned with consensus

To address these (mis)assumptions requires some effort and creativity. The following may be helpful.

  • Have some CEOs of family firms on the board, not just senior executives from non family firms.
  • Develop a long-term plan that you're willing to be held accountable to.
  • Remember, predictability of performance is very, very important to those on the outside looking in.
  • Develop a “strategic budget” that specifically identifies future business development; separate the “strategic budget” from the total P & L; set development milestones and performance measures that display how well the long-term plan is actually progressing.
  • Frequently articulate the family's values and financial expectations to the board.
  • Fully report variances to the strategic plan, without excuses, but with the action plans to correct.
  • Perhaps, most important of all, listen, listen, listen. The independent directors have something to say on these issues and they are not categorically wrong. Further, good listening lessens the appearance of defensiveness. And nothing reinforces the independent directors’ assumptions more than sensing defensiveness.

Independent directors of different backgrounds and views are a precious resource to the business owning family. But bringing that strength and difference of perspective into the boardroom requires excellent listening, mutual respect, and thick skin.

 

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