Advisory Board

Acts As A Safety Net For
The Family AND The Business
Provides experience to solve problems & identify opportunities

A successful Family Business Advisory Board consists of an objective and experienced business person or people who are not family and/or managers of the business - or advisors (CPAs, lawyers, bankers, etc.) who are otherwise involved with the family or the family's business. Most important today, as family businesses engage digital transformation strategies, having someone on your family business advisory board who is "technology savvy" is critical.

When we are helping one of our family business clients to set up an Advisory Board, we advise that a member of the Board be an "outsider" because these "outsiders" can bring a fresh perspective to problems and opportunities that face both the family and the family's business.

"If there were only one "success strategy" I could recommend to a family business, creating an Advisory Board would be that strategy," says top family business expert Don Schwerzler. "In times of crisis, the Advisory Board can act as a safety net for both the family and the family business."

Schwerzler has been studying and advising family business entrepreneurs for more than 40 years and he is the founder of the Atlanta=-based Family Business Institute






Why Have an Advisory Board?

There are many symptoms and problems that your family business could be facing. An experienced Board can help relieve tensions and resolve problems like these.

  • Continuing disagreements between family members
  • Broken communication between generations
  • Narrow ways of viewing things
  • Emotionally charged decision making
  • Problems attacked without objective perspectives
  • Distorted assessments of each other’s talents
  • Loss of commitment to the family and/or business
  • Questioned motives
  • Analysis paralysis
  • Family Business Stategic Planning

But a family business doesn't have to be experiencing problems to benefit from a Board of Advisors.

There are lots of opportunities that an advisory group 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 operations
  • to aid in the selection and development of the next generation of owners and leaders
  • to help expand and diversify the business
  • to counsel regarding succession and retirement plans

As part of our process for developing a Board, we highly recommend

CHAOS BUSTERS - 160 Key Business Questions - can be the basis for conducting a family business SWOT ANALYSIS to improve communication between members of the family and executives in the business.

Benefits Are Numerous

  • 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

When Is the Best Time to Develop a Board?

Right now! The sooner you identify what help you need and get that help committed to your family business, the sooner you will reap the benefits.

Is There a Downside to Having a Board?

It takes foresight and determination to set up a formal Advisory Board. Owner/mangers and family members must be willing to present - in an open, forthright way - to the Board, family issues, company operating problems and opportunities. Otherwise your Board can't help you. The sort of person you will want to recruit for your Board will certainly be capable of handling sensitive issues and confidential information with discretion. So we don't think there really is a downside - but the upside potential is huge.

How Do I Form a Board of Advisors?

Family Business Experts has helped family-owned businesses throughout the United States and in many different industries. We can assist you to determine which talents are required on your Board, help find and select Board members, 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!

How Many Members Are On An Advisory Board?

Start with one member - someone who the family members can trust and who is experienced in dealing with family business dynamics. That person should not be involved in the family and not someone who is already involved with the business such as the company attorney, banker or accountant. After all, those advisors are already being paid to provide their advice - having them on your advisory board is redundant.

Go slow - don't start out with more than one member on your advisory board. It takes time for a family business owner to learn how to "listen" to the board member - and then how to "implement" recommendations from the board.

Sometimes the family business does not have the infra-structure in place to make effective use of an advisory board. Don Schwerzler, founder of the Family Business Institute, has helped more than a 100 family businesses implement their advisory board strategy. "The key to having a successful family business advisory board is in preparing the family business to work with an advisory board - that includes the CEO and the other members of the family/management team", says Schwerzler.

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 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 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 a Board to develop its own leader. A larger 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 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 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 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 remain closely held, cash is the only method. Whatever the form of compensation, it is entirely appropriate that 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.
  • Creating "Tenure" Consider appointing your adult children to your advisory board. For example, if you have children going to college, having them serve on your advisory board is a smart way for creating “tenure” for them in the business. After college they may begin working in the business full time – but they have been serving on the advisory board for 3-4 years so they are not “greenhorns” to the management of the business. Scheduling quarterly meetings enables the kids to stay connected to the family business while they are in school or if they are working outside of the family business – while they are still learning about the family's business and staying acquainted with the management team and any new strategies that are being developed and implemented.

The bottom line is that an Advisory Board can benefit your family and your family's business. The Big Question that needs to be asked and answered - does your family business have the needed infra-structure to support an Advisory Board?

As part of our process for developing a Board, we highly recommend

CHAOS BUSTERS - 160 Key Business Questions - can be the basis for conducting a family business SWOT ANALYSIS to improve communication between members of the family and executives in the business.


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