Even experienced CEOs need an outside perspective from time to time. Forming a panel of trusted professionals can help keep your family business on track.
It has been said many times that it's lonely at the top, and that may be true for CEOs who choose to go it alone when it comes to setting a course and making decisions for their businesses.
In the corporate world, that seldom occurs, since boards of directors exist to focus on governance, performance, and strategic planning — providing expertise, asking tough questions, and issuing challenges to facilitate long-term success.
However, a CEO of a publicly held or nonprofit organization serves at the pleasure of his board, even though he may not have final say over who sits on the board or get along with them. In fact, I have often witnessed power struggles and resentment when boundaries, roles and responsibilities between the leader and the board are unclear.
Family businesses are a completely different animal, for the power usually lies solely with the owner, who may or may not feel inclined to create an advisory board to help steer the ship, so to speak. As a family business adviser, I'm a big proponent of such a body, since there may not be the checks and balances for decisions that a formal board can provide.
It is precisely because of the unilateral power of a family business owner, along with the potential for having a myopic viewpoint on key strategic issues, that having respected individuals to help provide perspective on critical topics is essential. Creating this type of a governance structure can make the difference in a family business succeeding both financially as a company and emotionally as a family.
However, it is important to note that an advisory board is different than a board of directors; most notably, it is not a legal entity and has no fiduciary responsibility. That being said, it can serve the same purpose as a board of directors in theory: providing unbiased feedback to the owner.
How to form an advisory board
Owners who want to start slow might identify just one person, perhaps someone in the same industry, to serve as a mentor. But even that one-on-one relationship will require being vulnerable to achieve significant benefits — and the first step is the same as it would be for a full-blown advisory board: identifying the purpose, including what the owner wants to get out of it, and what topics will be discussed.
Who should serve on an advisory board?
There are several key issues to be considered when deciding who should be invited to be on an advisory board.
For the body to work, the family business owner must be vulnerable, trusting a group of people who are supportive of the growth of the business.
The board can include family members, but they may not feel able to really speak their minds. It is best for an advisory board to be composed of professionals such as attorneys, accountants, industry experts, and the like who can provide a real business perspective, identify other streams of business, and weigh in on current processes.
Those tapped to serve on an advisory board (or a board of directors) should possess these qualities:
Ability to communicate;
Commitment to the process; and
Passion for the business.
Roadblocks to forming a board
Many family business owners have a hard time being open and are especially uncomfortable sharing their business challenges or the details of their financials. When they are willing, the payoff is invaluable, for board members can comment on everything from strategic planning and family-related issues to succession planning. An advisory board doesn't have any real power, but it can strongly encourage an owner to stop and think about issues that affect future success.
In my experience, most owners who have formed advisory boards, even those who were reluctant initially, find it doesn't take long for them to appreciate their value. It provides great peace of mind to get advice from people who care about the business, especially when tough decisions are on the table.
Denise P. Federer, Ph.D. is founder and principal of Federer Performance Management Group. She has 27 years' experience working with key executives, business leaders and Fortune 500 companies as a behavioral psychologist, consultant, coach and trainer. Contact her at: