Manny shares insight about the power of an Advisory Board to family businesses. If you want to learn more, please register today for the FORUM!
The problem that family businesses face is that they all generally think alike, quite literally. It’s not their fault, it’s in their DNA. It is in fact who they are, the proverbial “the apple doesn’t fall far from the tree” aphorism. That connectivity is perhaps the reason that many privately held, family run businesses have risen to greatness. But it is also a characteristic that can paralyze an organization.
Businesses, especially today, thrive on creative thinking. If management is cut from the same cloth, it may create challenges for the future of the company without an external voice of reason. An Advisory Board addresses these issues.
An Advisory Board is not a Board of Directors. A Board of Directors is responsible for the well being of the company and its shareholders. An Advisory Board has no fiduciary responsibility and instead focuses on the CEO and/or the rest of management, guiding them to make sound business decisions.
A good Advisory Board is comprised of trusted advisors that supplement management’s skill set. Before you decide who should sit on the board you may want to start by asking yourself “What do I want out of this?” Develop a S.W.O.T. analysis (strengths, weaknesses, opportunities, and threats). This process helps you identify the areas of your family business that need the most assistance. With this knowledge, you can identify professionals who you know who are problem-solvers and creative thinkers. In short, people who will get the job done.
Most companies initially gravitate to the Big 4 (CPA, Attorney, Banker, and Insurance Agent) when they start their board… don’t! You employ all of them and they may not feel comfortable giving you the brutal truth. If you must, two of the four is sufficient, but you should look for like businesses that aren’t competitors. If you distribute paper towels, perhaps you engage a distributor of coffee mugs. You’ll enjoy hearing practical solutions from similar businesses and you’ll feel like you are not alone.
Making it Work
Lastly, and this is very important, remember that an Advisory Board isn’t highly compensated like a Board of Directors. These people take time out of their day to help improve your family business. To make their experience worthwhile, remember to:
* Be appreciative
* Openly discuss a strategy to compensate an Advisory Board even if it is nominal
* Be prepared, and respect each person’s time.
* Take each meeting seriously and everyone should check their egos at the door. An owner should be humble enough to consider a board member’s idea and the board member shouldn’t feel discouraged when an owner doesn’t act on his/her advice.
With each meeting the process will evolve. Stay dedicated to the process, and choose a frequency for your meetings that’s meaningful. With an open mind to new, fresh ideas, great things will happen.