At first, many family businesses operate just fine with a designated boss or leader. But as family businesses expand and grow exponentially, it becomes harder and harder to operate harmoniously and balance both family life and business. In fact, over the years many family businesses have failed to overcome common challenges in light of not being unified as one.
One strategy that increasingly is being implemented is the creation of family business advisory boards. So, how can family business advisory practices bolster company success and what are the top tips on how to create an advisory board for your business? Keep reading to learn more family business governance advice.
What is a Family Business Advisory Board?
Put simply, a family business advisory board is an outside group of advisors separate from the family and the business who are there to provide objective advice and guidance. Normally, this expertise is given to the company’s board of directors or senior management of the family business. Even though family business owners are experts in their own respective fields, that expertise and their vision can be blurred or hindered when family and business challenges get muddled together. Which means, insight from independent industry leaders can never hurt.
In general, a family business advisory board can help with –
- Providing solutions or advice on financial issues
- Serving as mediators for difficult decisions amongst families
- Supplementing the skillset of business ownership and management
- Producing fresh perspectives when strategizing new ideas
- Providing objectivity when validating or exploring new business opportunities
Now that we have answered the ‘what is’ on family business advisers, let’s answer the ‘why’. Next, we will explore the inner-workings of family business advisory boards and how any size business can use them to the fullest for day to day operations, or for special considerations and decisions.
Why Implement Family Business Advisory Boards
Instead of hashing out the growth of your company at this week’s family dinner, doing so with your family business advisory board can be much more productive and strategic. A family business advisory board exists to provide business owners invaluable insight and structure from an outside perspective. With a group of family business advisers on your company’s side, you can benefit from their unique experience, strategic guidance and networks.
Experience – An effective family business advisory board has members from a wide range of industries and experiences. This group will provide valuable insight in addition to the singular vision that many business owners have when looking at their own respective industries.
Strategy – The experience your family business advisory members have also allows them to give helpful advice on strategic decisions. Their outside perspective increases creativity and viable options for improving operations or when thinking of solutions.
Networks – In business, it’s all about networking. By creating a family business advisory board with members from an array of industries you will open up your business to an even bigger scope of opportunities. This benefit can be especially helpful if your business strategy includes branching out with the launch of new services or products in a new market or niche.
Once you have decided your company can benefit from family business advisors, keep the following best practices in mind when structuring the group –
- Decide how many family advisory board members your business will need. Start with 3 – 5 and then flex as your business grows.
- Set guidelines on when and how often the family business advisory group will meet.
- Outline how the group will communicate business owners and board of directors.
- Create a mission or purpose and delegate individual responsibilities to business advisory board members, utilizing their respective areas of expertise.
Family Business Advisory Boards vs Board of Directors
Last but not least, let’s clear up a common misconception that family business advisory boards are similar to board of directors. The biggest difference being thata board of directors is tasked with making formal decisions onfamily business governance. In contrast, family business advisory boards are tasked with giving advice for the overall health and success of the company’s future.
While both groups will work hand in hand, their unique core functions allow each to focus on their own individual goals and objectives. Here are just a few other differences to note –
- Board of directors are insured, family advisory boards are not
- Board of directors have a fiduciary responsibility, family advisory boards do not
- Board of directors are elected, family advisory boards are selected
In many cases, the advice or insight of family business advisors will be shared with the Board of Directors to make a more sound decision.
The Final Word
A family business advisory board is just another example of a practice your business can benefit from that you might not have considered otherwise. Although family business governance might be the last thing on your mind as a busy family business owner, you should seek out similar safeguards to protect and continue the success of your business.. To do so seamlessly, consider partnering with a family business consultant like Double Iron Consulting.
Sometimes, the most valuable decision you can make for your business is seeking out an outside perspective. So contact Double Iron today to protect your business for tomorrow.