Family Business Advisory Board

Keeping New Year Resolutions – Consider Family Business Advisory Board Strategy

Many family business owners and their families get together to celebrate the Holidays. Not “talking shop” at these family get-togethers is a real challenge. During these family times, many families in business together make promises to do a better job in the New Year regarding family relationships and family relationships within the family business.

Some of the most common issues include:

• Continuing disagreements between family membersnn • Broken communication between generationsnn • Narrow ways of viewing thingsnn • Emotionally charged decision makingnn • Problems attacked without objective perspectives

• Distorted assessments of each other’s talentsnn • Loss of commitment to the family and/or businessnn • Questioned motives

• Analysis paralysis

But once the New Year gets started, most family businesses stay in the same rut as before – the issues continue to degrade the working environment and consequently, the family business never reaches it’s true potential.

Creating a Family Business Advisory Board may be the best solution to this problem.
Family Business Expert Don Schwerzler has worked as a family business advisor for over 40 years. Says Schwerzler, “If there were only one strategy I could recommend to a family business, that strategy would be to create a Family Business Advisory Board. The Family Business Advisory Board can be a wonderful safety net for both the family and the business!”

Many Family Business Advisory Boards have only one member from outside of the family and the business. But that one person can be very effective in helping to maintain healthy family relationships while at the same time helping grow the business in size and profitability.

It is important to understand that a family business doesn’t have to be experiencing problems to benefit from a board of advisors.

There are lots of opportunities that a family business advisory board can help the business capitalize upon:

• to bring additional depth and breadth to planning for the future

• to provide specific assistance in assuring the continued success of company operationsn
• to aid in the selection and development of the next generation of owners and leaders

• to help expand and diversify the businessnn • to counsel regarding succession and retirement plans

As part of our process for developing an Advisory Board we highly recommend two books:

CHAOS BUSTERS – A MANAGEMENT GUIDE http://www.family-business-experts.com/160KBQsp.html

The Practitioner’s Guide For Organizing An Organization – We think this is the best book available on Leadership and improving organizational performance http://www.family-business-experts.com/PGOOsp.html

Benefits Of An Advisory Board Are Numerousnn • Acquisition of high powered talent and expertise not otherwise available
• Fresh, reality based, objective evaluation of needs, talents and opportunities
• Major assistance in the tough decisions about business and family that need to be made
• Significant strengthening of the business planning process
• Enhanced objective problem solving
• Mature, knowledgeable guidance for better development of a coherent, innovative strategy
• Objective assessment of actual performance of family members and key non-family personnel

How Does An Advisory Board Operate?

First, let's contrast an Advisory Board with a Board of Directors. A Board of Directors exists and functions basically according to rules and guidelines set out in the legislation of the jurisdiction in which the business is incorporated plus legal precedence and guidelines that have generally built up from law suits in the area of corporate governance. An Advisory Board is not governed by legal statute, so it can operate pretty much however you want it to. Think of it as being like an organized group of consultants.
As such, you and your Board members have lots of scope to define how you will operate.
But, like any relationship, if it is to function effectively, there should be some planning and guidelines. Here are several suggestions and thoughts for your consideration.

• Duties. They will be exactly what you want them to be. If Family Business Experts worked with you in planning how to form your advisory board, we will all know what duties are required. Our suggestion is always to incorporate this into a job description, for the same reasons that all your employees should have a job description. It might even be appropriate for particular member's descriptions to vary somewhat according to the expertise they are bringing to the Board. We suggest that every member of the advisory board should be intimately familiar with your business plan. Their job description should include a requirement that they reference their advice within the context of the business plan.

• Leadership. In the early stages, and with smaller family businesses, the CEO will probably provide leadership and direction as to what is required from the advisory board. However, over time and with increasing size, there is merit to allowing an advisory board to develop its own leader. A larger advisory board will have a certain amount of internal interaction and dynamics and in some circumstances might need to perform some of its functions somewhat separate from management. Your family business' needs will dictate how this develops.

• Size. Whatever you need to get the job done. Size and composition of your advisory board can, and probably should, change over time with your changing circumstances.

• Authority. Unlike Directors, no authority is needed to carry out statutory requirements. So an advisor needs only the amount of authority that is consistent with his / her duties. Planning their tasks and job description should identify whatever authority is needed.

• Relationship with employees. Again, the planning and job description should identify what type of relationship is needed. It can vary, but our experience is that an advisor can't provide the best advice if they have to work in a vacuum.

• Meetings. The frequency of meetings and whether proceedings are formally recorded should be decided in light of the size of the advisory board and what its tasks are. A small group with fairly specific tasks might not need minutes and a reporting structure. A larger group might require more formality. Frequency will also depend on the task, but we generally think that more frequent is better. Perhaps every month or two at first. The advisors themselves have to have a chance to interact amongst themselves, and to "tune in" to changes occurring at the business. After all, they all have many other activities in their lives and probably don't "eat and sleep" the business like you do. If meetings are less than quarterly, we cannot help but wonder how well the advisory board is tuned in to the business and whether any advice is relevant and timely.

• Compensation. Costs to attend meetings and promote the business should obviously be reimbursed. As for pay, probably the best guideline is that "you get what you pay for." For traded companies or those in the process of getting listed, stock is often appropriate rather than cash. But for many family businesses that will remain closely held, cash is the only method. Whatever the form of compensation, it is entirely appropriate that advisory board members should operate under the same "pay for performance" criteria as any other employee. They should have a job description, and their performance can be measured. They should be there because they have a role to fulfill, not because of friendship, so they will also welcome performance evaluation.

How Do I Form an Advisory Board?

FAMILY BUSINESS EXPERTS has helped family owned businesses throughout the United States in many different industries. We can assist you to determine which talents are required on your advisory board, help find and select a board member(s), and coach you in how to effectively utilize your board. Using our services can be particularly beneficial when you want your search to be discreet and confidential. It need not be a long, drawn out, worrisome undertaking. We can make it happen for you in a short time!

Don Schwerzle
Founder
Family Business Institute
Atlanta GA 770.237.9818nfamilybizexperts@earthlink.net
www.family-business-experts.com

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