How can an Advisory Board Benefit Family Businesses?
An Advisory Board with the alignment and input from the Shareholders and Directors sitting along an independent with business experience is becoming an increasingly common way for family owned businesses to manage their future pathway, in addition to providing a safety net in difficult times. An independent voice (which is often an Independent Chairman) should challenge the business as it pursues growth and sustainability, navigates succession planning and potential exit plans.
For the average family operation, a full Board of Directors just isn’t necessary. However, regardless of the size and age of the business, a strong focus on Governance is vital. This can take the form of an Independent Director and Advisory Board, to engaging someone with a successful track record of business ownership or bringing in someone for a short period of time with specialist skills. The key priority needs to be on improving company performance and sustainability linked to improved financial wealth for the family members.
Why have an Advisory Board?
- Improve the quality of life and work life balance for family members and their people.
- Enhance internal communication and break down barriers between family members and the management team.
- Develop pathways for the business by growing its people and culture.
- Ensure succession plans give family members the opportunity to sit above the business not in it.
- To provide an independent voice to challenge the status quo and relieve any stress and tension that may build up between members of the family.
- Introduce business experience and skill sets not otherwise available.
- Bring strategic planning to the business for sustainable growth and consistently strong financial outcomes.
- Ensure that business planning leads to KPI’s measured against targets.
- To introduce experience, knowledge, and composure when economic downturns or competitive pressure affects the business.
What element of Governance fits your business?
For many family businesses, an effective Advisory Board adds considerable value. The type of Governance approach will depend on a number of factors – where the challenges lie, what is keeping the owners awake at night, the size and maturity of the business, the ambition and alignment of family members and of course affordability.
- For smaller family owned businesses with a couple of staff up to 3 to 4 employees, having an Advisory Board is often the ideal option
- On the other hand, larger family operations may justify a full board with fiduciary responsibilities and therefore take a more formal approach to appointing both an independent chairman and independent directors.
- If you are looking to start out on the Governance path, just having a sounding board with someone to talk to when the need is there, is a practical, logical and cost effective way of getting started and keeping the business on track.
Regardless of the type of Governance structure that you opt for, it vital the business has good effective processes for business & succession planning, quality reporting and performance monitoring. Regular formal reviews are essential to review the key functions in the business including customer service, competitive issues, growth, cash flows and budgeting, HR issues and recruitment. These reviews should also provide a healthy forum for family members to air any frustrations or issues which is where an independent party can add considerable value.
Its not a one size fits all approach but as we say to anyone we work with you don’t have to be an All Black to play like one!
Where do we start?
Before setting up an Advisory Board it is important to know what you want to achieve along with a clear picture of the strengths and weaknesses of the business. Before we now engage in any Advisory Board role we utilise a very simplistic but useful tool The BAT (Business Assessment Tool).
The BAT is an online evaluation tool that takes 10 minutes to complete and provides an excellent visual insight into the capabilities of all key functions across a business.
Click here to see how your business shapes up.