Why Every Family Business Needs a Board of Directors
In a family business, the idea of having a board of directors might seem like overkill, or an expense you can’t afford. Most companies don’t bother to get one until they pass $50 million in revenue–which can be a big mistake, with a heavy price tag.
To be fair, it doesn’t seem like the most important thing when you’re in startup mode. First of all, you have to find people you trust, who have expertise in areas you don’t. If you’re wise, you’ll intentionally look for people who challenge or disagree with your ideas. That search takes time.
It also should have a cost. You’re asking someone to take time out of their day, to lend their knowledge and expertise to the success of your family business. If your company’s just getting started, it’s going to be focused mainly on sales and new accounts. You might ask yourself, “How can I pay board members, when I can't even pay my bills yet?”
I have no argument there. But, in the same breath, I’ve also worked with a lot of family businesses where the “bills” are results of poor choices made in isolation. Owners invest money in things they have no business doing, because they “think” it will help them grow.
They wouldn’t have necessarily made those choices if they were subject to the review of a board of directors. There’s nothing more grounding, when you’re excited about making a purchasing decision, than someone who demands you justify the expense.
In even better news, that kind of intimate knowledge and consulting isn’t as expensive or time-consuming as hiring a full board. Click here for a FREE Business Transition Assessment and a 30 minute virtual review ($299 Value). Make the Rest of Your Life the Best of Your Life.
What Can Happen Without a Board
A few years ago, I spent some time consulting for a client I’ll call Carolyn. She and her husband started and ran a successful construction company for 32 years.
Carolyn’s husband died of cancer. He was the visionary and direction-setter, although she was essential to the operations and management. They’d grown well, but never hired a board.
Carolyn wanted her adult children to join the family business, which they did. Everything held steady for a while … until questions arose about the direction of the company. Carolyn wanted to maintain it the way she’d run it with her husband, but her children had different ideas.
Their family business deteriorated over time, because of ongoing conflict between Carolyn and her children. As we attempted to work through those issues, it became clear that if they’d had outside perspectives, they could have made better decisions about the company much earlier.
Carolyn might have decided to sell the company, if she could have been unemotional about growth, planning, or financial issues. Maybe her kids would not have liked the direction she and her husband agreed to, but at least they’d have known that. It would have given them a clearer choice about joining the business in the first place.
Even if Carolyn didn’t hire a board, she could still have surrounded herself with other, like-minded family business owners who might have helped her see this coming. A resource like the Tennessee Center For Family Business would have nipped this problem in the bud.
Click here for a FREE Business Transition Assessment and a 30 minute virtual review with a family business advisor to discuss a board of directors for your family business($299 Value).
How Boards Help You Grow
Ice hockey wasn’t a huge sport in Tennessee when I was growing up, but the Nashville Predators are a fun team to watch. I enjoy going to their games.
One thing I noticed in this sport is how much players use the boards to their advantage. They’ll bounce passes off of them, and roughhouse in the corners. The boundary formed around them by the boards forces players to get creative about handling the puck, passing and creating scoring opportunities for their teams.
The last time I watched the Predators play, I suddenly got the analogy–boards of directors force leaders of family businesses to do the same thing. If you’re thinking about spending a ton of money on advertising or equipment … but you know you’ll have to explain it to a board member who asks a lot of annoying questions … you’ll think twice.
Maybe, like one of the Predators, you’ll become a “team captain” who plays well and leads your family business team to victory. You’ll start thinking and acting like an executive–sitting down to think, instead of standing up to shout. Let me assure you, a well-chosen board will demand accountability from you when it comes to planning for growth.
If you think creating a family business board of directors can hold you and your team accountable to help you family THRIVE and your business PERFORM, schedule a FREE call today with a professional family business advisor to find out how. Click here for a FREE Business Transition Assessment and a 30 minute virtual review ($299 Value). Make the Rest of Your Life the Best of Your Life.