The Family Business - To board or not to board? - Phyllis J. Campbell
Part 1 of 3: The Strategic Advantage of External Boards in Family Businesses
In our dealings over the years with family-owned businesses, there is much to admire in the innovative ideas and entrepreneurial spirit of the founder(s). All of this has brought about a built-to-last business that provides great products/services and jobs, community and employment impact for so many. The early-stage companies generally are successful because they have strong-willed founder(s) who have continued to have an outsized influence in the control and the running of the business.
As the business matures, there is generally a conversation about succession of leadership that typically involves handing the title of the CEO over to a trusted offspring. If there is no successor within the family, there is usually a successor that comes from a list of a trusted advisors, partners or an employee that is known to the founder(s).
However, there comes a time in the life cycle of the business whereby:
· The founder wants to begin to withdraw from the daily involvement of being “in” the business with the CEO
· The successor-CEO has a desire to branch out and grow the business, with new strategic directions
· Additional family members (in next two generations) are interested in the future of the business and are asking what their role may be
· There may not be another logical successor to the CEO that is identified
This article is written for the family/founder-led business that have a desire to see the business stay in private hands for the foreseeable future. The premise is that a “real board”, constituted with family members and independent outside directors, can play an integral part in keeping the business in private hands and operating for the long term. A “real board” is generally defined as a fiduciary board of directors, with a balance of family and independent board members. A strong advisory board can also be a good starting point for bringing in outsiders.
What we often hear from founders some of the perceived barriers to adding outsiders to a board:
“I don’t want to cede control of our decisions to outsiders”
“I don’t need the extra hassle and cost of having an outside board”
However, if there is a serious intent to have the business last for generations, then a board (family plus outside directors) can add much value. Ore-Pac, a highly respected private business headquartered in Oregon, stated on their website: “we want a business that will thrive for generations”. They have an evolving strong advisory board that the CEO, Brad Hart, says “holds us accountable”.
And the benefit of having outside directors is to have more shared accountability for the long-term results in the business.
In Part 2 (coming next month), we will examine the framework of questions that need to be answered as the family and founder consider what they need for the future of the business.
Phyllis J. Campbell is a Family Business Board Consultant with over 40 years of board and executive leadership experience. She has led in both nonprofit and public sectors and now advises family businesses. Passionate about fostering diversity and inclusion, Phyllis focuses on building strong board cultures to support sustainable growth and long-term success.