The 'How' of 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 board that the family will listen to? How do we even find directors? What does a board do that a management team or family advisory board does not do?
In my work with family businesses, both as a consultant and a director at a family business center, I have been asked these questions many, many, times.
In fact, the two questions I am asked most often are: “What does a board do?” and “How do I find independent directors?” I usually answer by starting with what research has told us about boards – including that an independent board of directors has often been cited as one of the three essential elements found in successful multigenerational family firms.
But that research only tells us that we should feel positive about building a board. It unfortunately doesn’t tell us how? And it has been my experience with family business that it the how that gets in their way, not a lack of desire for a board.
In fact, what I have seen the most, particularly in first- and second-generation family businesses, is a model that supports either all family on the board or a mix of family and current advisors or close friends. Because, buried in the question of how, is the feeling that we need to trust the people we are looking to for advice. It’s the most important element of any advisor relationship. This is one of the reasons why so many families choose these individuals; they have a history.
Often, when individuals acknowledge their business needs a board, they focus on skills is the first step. For example: we need more of a strategist, how do we find someone with those skills? Obviously, skills are important. Smart people, great experiences and relevant education are all attributes 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 tenet for all family business decisions still applies: it’s about values and culture and fit. Your culture and values are central to your family business’ identity – how is some independent director (a stranger) ever going to really appreciate this? Developed by stories and experiences and rules around membership in your family, your values and culture have special meaning and drive the business, the family and their decisions. Your choice of independent directors should be no different.
The process is an important one, and yes, there is a way to find the right directors with the right skills and the right values for your family. After working with family enterprises for 15 years, we have learned a few things about culture, fit and the importance of values on the board. This is work we increasingly do for clients and we have developed a very effective process for finding, placing and developing 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 kind of individual will fit the firm’s needs, what attributes are key to make a good fit of that individual or individuals with the family and the business, and to ensure these directors understand your values and your culture.
Yet, whether you conduct 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 will need to be able to support these objectives in their role on the board, as all directors serve at the pleasure of the owners. Once the owner’s vision is clear, an analysis of the business and industry are important – to discern which skills are most critical going forward. Where is the business heading? What are the big challenges that are present or emerging in the industry? Getting clarity on these questions will help you appreciate what skills and knowledge you want from directors to help bring your company to the next level.
While combining family priorities and business needs in recruiting strong independents for your board can feel daunting, the result is well worth the effort. On your own, or with our help, we hope you will embrace this governance model if you have not already.