When family business owners ask me about governance, they usually assume the goal is more of it.
More structure, more oversight, more formal process.
And there’s good reason for that assumption! Most of the warnings you hear are about businesses that have too little.
But it’s also entirely possible to install too much.
If you’re not ready for a fiduciary board of directors with an audit committee, a governance committee, and a compensation committee, then you don’t need to build that. You’ll overstructure. When you put too much structure in your business, you end up slow-moving, lethargic, and bureaucratic. You add cost and drag without adding value.
The opposite extreme is also a problem. Without any structure at all, you’ll certainly be entrepreneurial and flexible. But you’ll never get anything done. You’ll lose focus. Decisions won’t stick because there’s no process for making them stick.
The right amount of governance sits in the balance between structure and flexibility.
And where that point lands depends entirely on where your business is in its lifecycle.
Governance grows up alongside the business
I spent a good part of my career in the horticultural industry, and I can’t help but see family businesses the way I see trees.
Every tree has a natural, predictable lifecycle. A dogwood and an oak planted the same day are the same age, but they’re in completely different stages of life.
Businesses are no different.
When you know where your company sits in its lifecycle, you can predict the problems you’ll face and you can match your governance to the moment instead of to some idealized end state.
Here’s how that tends to play out.
Early on, every entrepreneur already has advisors.
They may not call them that (and they usually don’t pay them) but they’ve got people they trust for feedback on their products, the market, how to finance the business.
That’s governance in its earliest, lightest form, and at that stage it’s exactly enough.
As the business moves from startup toward maturity, the questions change.
Now it’s How do I scale? How do I hire key employees? How do I finance a growing business?
That’s usually the moment to set up what I’d call a more formal advisory board. In many ways you can treat a formal advisory board like a fiduciary board. It meets regularly and it holds your leadership team accountable to its strategic goals. But it doesn’t carry the fiduciary responsibility.
Eventually, at a certain size, you consider a true fiduciary board.
We generally see that conversation start north of $50 million in revenue, and most often around $100 million. I’m speaking in general terms here. It always depends on your particular family business situation.
But that’s the range where the complexity usually justifies a board that’s legally empowered to make decisions and legally bound to act in the shareholders’ interest.
Notice the pattern: the governance didn’t arrive all at once, and it didn’t arrive because someone decided it was time to be more corporate. It matured because the business got more complex, and the old structure stopped fitting.
Governance that doesn’t fit your stage of business actively costs you.
Overbuild it, and you get the friction of bureaucracy: layers of process for decisions that used to take a phone call, meetings that generate activity instead of progress, good people waiting on approvals that add nothing.
What worked when the team was 30 people doesn’t work at 100. The reverse is just as true. A structure built for 100 will smother a business of 30.
Underbuild it, and you get a different kind of friction. As complexity increases without the governance to match, conflicts get harder to handle and decisions get harder to make.
The disagreements that a clear process would have settled escalate. And in a family business, those disagreements tend to carry years of personal history along with them.
If decisions are getting harder rather than easier as you grow, your governance has fallen out of step with your business.
Let your governance evolve on purpose
The single best mechanism for keeping governance matched to your business is the board itself.
Because a board is designed to evolve.
It starts informal and advisory, it formalizes as the questions get bigger, and it takes on fiduciary weight when the complexity finally warrants it.
If you let that evolution happen deliberately, your governance keeps pace with your growth.
If you overbuild too early or refuse to it build at all, you create friction you don’t need.
So, the question isn’t How much governance should a family business have?
There’s no universal answer to that.
The better question is: What does my business need right now, at this stage, to make good decisions and keep them?
Revisit that question as you grow, and you’ll install the right amount of governance along the way.
If you’re not sure whether your governance is the right fit for your stage, or if you recognize that you need to install better governance, we can help. Reach out to speak to one of our expert advisors.