07/7/16

The Advisory-Board Confusion

“Our advisory board includes my dad and me, my uncle who is retired from the business, and our non-family Chief Financial Officer. He’s on the board because he’s unbiased, and will make decisions based on what the business needs. Otherwise, my dad and I make decision on what’s best for everyone…”

The above statement made by a second-generation family-business leader shows confusion as to what advisory boards are; how they function, and how they differ from executive boards.

A family-business executive board is a governing body. It may include family members in leadership positions as well as key non-family staff who have decision-making power. All are on the company payroll. They have a vested interest in the welfare of the business, and in the case of family members, in the welfare of the family too.

Often the first foray into a board for family enterprises, an advisory board is comprised, predominately, of individuals who are outsiders with no vested interest in the business. They have no say in deciding how the business or the family will move to meet challenges. Their job is to advise on family-business best practices and provide an impartial view of the business’ interests and how to further them.

This trusted group of mentors is handpicked to provide supplemental industry knowledge, operational know-how, financial savvy and other areas of professional expertise. With the objectivity that comes from non-attachment to the family or the business, they are in position to make clear observations and suggest strategies that are free from the morass of family dynamics and nepotism.