#024 Family Business 101 – WHY A BOARD CHAIRMAN IS GOOD FOR YOUR FAMILY BUSINESS

We arrived for lunch at this modest, yet sophisticated destination that should be on your list of places-to-eat-at-in-the-city. As we settled at the only unoccupied table-for-two, my heavily dog-eared notebook, fell to the floor with a slight thud, leaving me embarrassed at my clumsiness. I quickly picked it up, only to find Aunty Baby beaming at me with her mischievous sense of humour. 

We soon ordered. And as we waited to be served, Aunty Babys’ attention was suddenly drawn to one of the daily papers. In turn, I found myself fiddling with the open page of the notebook I had picked from the floor. It wasn’t long before I found myself trying to discern the chaotic and confusing mass of rough scribbles in the open page. A statement on the top border of the dog-leafed page, soon jumped at me. It read; 

When a family-in-business introduces board diversity, it sends a positive and motivating message to customers, shareholders, and employees – the family MUST strike a balance between the interests of the family [as owners] and the business [as an entity].”

The statement reminded me of two typical scenarios experienced by families-in-business. The dynamics of which, replay themselves out with almost predictable frequency . Though brief, this description of some of the dynamics can be quite informative and amazing in insights.  

Scenario #1 – Board Dynamics in Typical family-owned business

A meeting was in progress on one side of town….  The Marketing Director went ….on and on and on … but she was family, and so Dad let her go on, and on, and on. The Marketing Director‘s brother sat there upset, bored, and angry. The other family members in the meeting sat there irritated, ……. Getting decisions aligned with business initiatives was a far cry in these meetings, and nothing ever got done. Dad, who often chaired the meetings, was perceived as too soft and there was far too much history between the various members of the family; history, which often crept into decision making process and on how the family managed the business.

It was a major challenge for the family to balance the need for family accord with the responsibilities of running the business. Hard decisions were difficult to make when "all votes are equal" or when the head of the family head [being also the chairman, father and husband] sought to take the business where younger members don’t want it to go. A bucket list of family dynamics often got in the way during the family meetings – deterring progress – in both the family and the business.

Scenario #2 – Progressive Board Dynamics in family business

While on the other side of town, when the Marketing Director tried to go on a little too long, the Non-Exec. Chairman politely suggested she keeps to the point and bring the argument to conclusion. The rest of the Directors were thankful for the Non-Exec Chairman's polite intervention. And with the guidance of the Non-Exec Chairman, during such meetings, the business of the day progressed in a fair, well informed and timely manner.

This family business had a fully functional board, made-up of family and non-family members. “We saw real value in having a mix of family members and independent (non-family) directors on the board ages ago,” said the Founder. “External directors who are not part of the family bring different perspectives and skills and help control family businesses from being confined and only inward-looking in their thinking.” He continued.

Scenario #1, is a path a sizable chunk of family businesses continue to struggling along.

However, there is optimism and some really cool stuff happening. I call them the trendsetters in family businesses. They have these issues figured out. They recognize, that while there can be real joy in working with your family, sometimes however, it really helps to have a neutral [Independent Directors on the board, even] to chair the Board, and being available during the month to - advise, be a deaf-ear, and sometimes referee. Needless to say, not only family businesses can benefit from having an external Non-Exec Chairman - if the role is well defined and executed well...

The role of the Chairman:

A boardroom culture, with independent directors is a long proven, respected and sustainable solution to delivering on expectations in family and private business. The following #9 points lay out the key elements of the Board Chaimans’ role in family businesses’

1.      Providing leadership to the board.

2.      Taking responsibility for the board’s composition and development.

3.      Ensuring proper information for the board.

4.      Planning and conducting board meetings effectively.

5.      Getting all directors involved in the board’s work.

6.      Ensuring the board focuses on its key tasks.

7.      Engaging the board in assessing and improving its performance.

8.      Overseeing the induction and development of directors.

9.      Supporting the CEO/MD.

As if reading my mind, Aunty Baby suddenly turned the newspaper page with the story towards me; “look at this, yet another family business with a governance challenge.” She said. As I read it, my heart started pounding the way it might during the final minutes of a close game. The story seemed to validate my thoughts. Struggling for the right words, I blurted out;

“Effective Family business governance is crucial in ensuring a family and their businesses grow and transitions from one generation to the next.”

Lunch was served shortly thereafter.

Our target as experts in family-owned enterprises, is to drop the bucket further down the well deeper than anybody else AND to support better understand the challenges [put structures in place] and tackle the really deep-seated issues that make families and their family-owned businesses thrive for generations. If your need to talk we are here to listen and provide you with solutions. .………over to you………

Peter Ouma Muga – is a HR Trainer and Family Enterprise Consultant, and an accomplished writer on family business management issues, with over 18 years’ experience in family and blue-chip multinational consultancy firms and companies. He possesses an MA Psychology specializing in Organizational Behaviour, and heads human capital at Institute For Family Business (IFFB).