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.


‘Applied Innovation’—Defined For The Family Business


: a new idea, device, or method

: the act or process of introducing new ideas, devices, or methods

Source: Merriam-Webster’s Learner’s Dictionary

 Applied Innovation:

: the process of constant improvement and creative change

: a requirement for the continued success of multi-generational family enterprises

Like any other business, family businesses benefit from, if not require, a culture of innovationa culture that supports constant improvements to its products, services, processes, governance, and planning.

While the dynamics within family businesses often present obstacles to innovation, a clear view of the competitive advantages of an innovative culture can overcome them.

Next week I’ll write about these obstacles and about some of the advantages enjoyed by family businesses that support a culture of innovation.


Assessing Emotional Intelligence – The Results Are In

For the past two weeks I have been writing about emotional intelligence and its role in family business. From the many responses I have received, it is clear that this topic has struck a chord with readers.

This week I want to briefly show the value of applying emotional intelligence assessment within a family business. The case is presented by author Ernesto Poza in the 4th Edition of “Family Business,” published by South Western Cengage Learning. I use this text in my Family Business Management class in the Zicklin School of Business at Baruch College, City University of New York.

Poza writes about a family with challenging dynamics. They wished to create an environment of engaged conversation while ensuring all stakeholders were sufficiently respected. Following an assessment of the family’s facility for emotional intelligence they developed a Family Rules of Conduct. The rules they agreed to were:

  1. Focus on the future, not the past.
  2. Be a good listener.
  3. Put yourself in the other’s shoes.
  4. Stay focused on principles, not personalities.
  5. Make “I” not “You” statements.
  6. Say “Got it” whenever speech-making blocks progress.
  7. Disagreements are okay, as long as we are committed to arriving at an improved final decision.

What do these rules tell you about the family’s overall level of emotional intelligence?

Do you think the application of emotional-intelligence assessment tools was useful in this case?