Acting as a non-executive director or board adviser for a family-owned business presents both challenges and opportunities that you won’t find in other types of company. To meet the challenges and take advantage of the opportunities, you need to ask six questions before accepting a role on the board.
1. How is the company governed?
- Who currently owns the business?
- Who makes the decisions?
- Is there a succession plan in place?
Many family-owned organisations have simple shareholder structures and operate within established regulatory frameworks, governing such things as the length of time people can serve on the board.
Depending on the size and nature of the business, the owners may or may not have considered establishing a family charter.
Most family businesses will have both written and unwritten rules of operation.
As a new independent board member, you will need to know as much as possible about these structures, frameworks and rules. This will also help you to navigate family politics.
2. What would your involvement be?
- What is the legal structure of the role?
- Are you there purely as an adviser?
- Are you joining as a non-executive director, registered at Companies House, or as a board adviser without voting rights?
If you are going to be a board adviser, make sure the governance structure is set up appropriately and you don’t unknowingly act as a shadow director with the same responsibilities and liabilities as an appointed director listed at Companies House.
If you aren’t there as a formal director, you may have influence but not control. This may be something you have not come across in previous NED roles. Will you be OK with the board ignoring your advice sometimes?
If you’re there as a board adviser, will you be happy to act as a consultant on special projects from time to time? You need to get clarity on such boundaries before you accept the role.
3. What is the company’s mission?
- Does the business have a clear purpose statement and/or mission and vision statement?
- Does it have a values or principles statement?
If these elements do already exist, it will be easier for you to gauge whether they are things you can get behind because you believe in them too. But if they are not yet clear, but you like the path that the business is on, perhaps you can help to establish them. It may be that the values are strong but not well documented. Understanding what the key stakeholders are already aligned on will provide a clear focus for the board’s decision-making.
4. How much do you know about the family legacy element?
Any family-owned business has an extra dimension that an independent director or board adviser needs to think about. Ask about the backstory – for example:
- Who originally founded the company?
- What legacy has been passed down through each generation?
Executives who are family members will be only too aware that the business has lasted for generations. They will feel the pressure of ensuring that the business continues to operate and serve its customers in accordance with its mission and values.
Remember, you haven’t been brought in to join the family, but rather to enrich the board with your independent perspective. But you must give due consideration to the family legacy element and how it might influence decisions and risk appetite.
5. How is your emotional intelligence?
Emotional intelligence (EQ) is an essential trait for a non-executive director or board adviser in a family business. It will be crucial for you to be able to read people, so that you can:
- appreciate their needs and concerns
- pick up on their emotional cues, and
- sensitively navigate the power dynamics of the board.
You’ll need to be able to manage your own contribution to ensure that you:
- have a positive impact on the communication across the board
- can help diffuse any potential conflicts, and
- when necessary, be the voice of reason and diplomacy between family members who don’t see eye to eye.
Once you’ve got to know the board and the business, you’ll need to strike the right balance between respecting the DNA of the family ownership and sensitively challenging existing family views.
Equally, you’ll need to feel you can speak freely and that the board will welcome, respect and listen to your views.
6. Are you able to work hard on communication?
Directors who are family members will have many opportunities to discuss the business outside of formal board meetings. The time you spend with other board members will be much more limited. If you feel you don’t have sufficient insights or information to be able to add value at board meetings, you might need to take action to correct this.
You and the other directors should all receive the same information for board meetings. However, it may well be that it’s the information that doesn’t appear on the official agenda, but is discussed between family members before the meeting, that describes what is really happening in the business. You may therefore find it helpful to schedule pre-meeting calls with key individuals, and to ask diplomatically for any information that you think you are missing.
As a new board member, you may not feel like questioning every item that is unfamiliar to you, or asking for the backstory on numerous aspects of the business. So again, exercising your EQ will help you decide when to challenge and when to hold back. Earning the respect and confidence of the board so that they will bring you into the fold is key to establishing an open line of communication and trust between all parties.
For more information, email me or call me on 020 7099 2621.