Building and sustaining a prosperous family business that thrives for generations is no small task – and generally isn’t something you can do alone.
It’s important to have not only a strong and trustworthy internal team of leaders, but also a trusted advisory board.
What is an Advisory Board and what is its purpose?
An advisory board is a collection of outside experts who can serve as counselors and a sounding board for your family business owners, directors, or other high-level leaders.
We recommend choosing advisors who have experience and expertise that is relevant to your current business needs. For example, if you are an e-commerce business, you would be well served by having an e-commerce expert on your board.
Such a group allows your family business leadership to access knowledge and expertise from outside their organization, test the merits of their strategic thinking and add an outside perspective to help guide the business to its most prosperous future.
An advisory board isn’t charged with making decisions for the business or guiding day-to-day governance – instead, this board acts to stimulate robust strategic discussion and provide new insights that help your team make better, more objective, long-term decisions.
During our years as business advisors, we’ve seen family business advisory boards serve as invaluable resources for keeping a family business in the prosperity zone. Having a stable of subject matter experts and experienced businesspeople can help a leadership group challenge its own ideas and think more strategically.
What issues does a family business advisory board address?
Every family business is different, so every family business advisory board will serve a slightly different role, depending on the organization’s needs. That’s where you benefit from having engaged in clear and regular long-term strategic planning. If you’ve gone through that process, you’ll have a good idea for how your business advisory board can best serve your organization.
What insight do you need? What strategic decisions are you struggling with? In some cases, a trusted certified family business advisor can help you clarify your needs.
Some family businesses may need support for marketing and sales decisions, while others may benefit from outside counsel on human resources decisions. Still others may need outside perspective on adapting to industry regulations or expanding into new markets.
It’s also not uncommon for a family business to call upon the expertise of its advisory board when family leaders of the business disagree on overall direction for the organization. Ultimately, it’s up to you and your leadership team to define the purpose of your advisory board and to clearly communicate the charge for the group.
Roles and Responsibilities of Family Business Advisory Boards
Because family advisory boards aren’t one-size-fits-all, the roles and responsibilities defined for these boards will vary according to the organization. But through our years of serving as family business advisors, we’ve seen some general must-dos, which we’ve outlined below.
Establishing Advisory Board Members
When establishing the members of your advisory board, it’s important to include a well-rounded group of business advisors who have the experience, insights and vision to provide your leadership with thoughtful counsel. You should look for experts you trust who have experience leading family businesses – or who have business experience that is closely related.
Overall, a good advisory board comprises professionals who are honest and act with integrity, who aren’t afraid to tell you the unvarnished truth and who have their own track record for success.
A good place to start with your advisory board is choosing a chair. This individual will be charged with helping define the structure of your advisory board and articulating the process by which it will work. In our experience, a good rule of thumb is a group of three to five advisors who meet roughly once a quarter. Your advisory board chair also should be someone with the insight and sound judgment to evaluate advisory board structure and process and confidently make recommendations for how to improve them.
Finally, your advisory board chair should be someone who can bring value-driven insight and advice that helps your advisory board and your organization achieve their desired results.
External advisors are a key component of any successful advisory board – they bring industry insight, experience and perspective from outside of your organization. Their ability to approach your business’ challenges from a different angle is invaluable in checking for holes in your strategic thinking. You should choose external family business advisors who are known for their sound judgment, ability to problem solve and a documented history of positive business outcomes.
While we’ve found that some family business owners find it hard to invite outside critique of their business decisions, we’ve also found that those who are courageous and vulnerable enough to do so enjoy tremendous benefit from considering the perspective external advisory board members offer.
Let’s not forget that, at times, family business decisions can be emotional – and while those emotions are important to recognize, they shouldn’t necessarily drive business decisions. External advisors who are objective, yet empathetic, can make a world of difference when it comes to navigating complex and emotional decisions that directly affect the family.
An effective advisory board will include a broad diversity of internal perspectives, which means including both family and non-family members. Many successful family business advisory boards include representation from the top levels of the business leadership – this may mean founders, directors, CEOs, lead investors and other senior executives.
Your internal directors are the ones who, ultimately, must develop, implement and measure success against a sound strategic plan, so their having exposure to your external advisors’ expertise is a must-have as they lead the long-range forecasting and planning of your organization.
Your internal members provide a governance-focused perspective to the group – these members should have a thorough understanding of your family business and a high level of trust from the majority of the family members invested in your organization.
One of the most important steps you can take toward protecting the long-term health of both your business and your family is to form a family business advisory board
This group of professionals can provide objective industry and functional expertise to your company leadership, supporting the success of your business and your family.
If you’d like to get started on developing an advisory board for your family business, we invite you to reach out today and set up a consultation call with a certified family business advisor. We’d love to help.