Family businesses often lack the breadth of vision and diversity of experience needed to take the business to the next level. It has been known that in some businesses if the “right person” does not introduce an idea, it simply doesn’t get a reasoned consideration. In those cases, the business becomes insular and static, and it risks becoming no longer relevant to the marketplace.
Creation of an Advisory Board made up of outsiders who are experienced business leaders is a way to “push the envelope” and cause business owners to examine directions and possibilities they might not otherwise consider. An Advisory Board can make the business stronger, increase shareholder value and better position the company to capture the opportunities that are available in the market place. Advisory Boards are ideal for those companies that are not yet ready to have a “full charge” board of directors. A board of directors has power to direct that actions be taken, while an Advisory board is just that, advisory. Their decisions are not binding.
An Advisory Board is not there to “tell the owners what to do,” but rather to ask penetrating questions that cause a more thorough, in-depth examination of the opportunities. They often ask the questions that insiders are reluctant to ask. The business owners benefit from outsiders looking at their business and making a comprehensive review of all activities.
Properly constructed, the Advisory Board gives owners access to high-level executive and management talent beyond that employed by the company. In some cases, it means having access to millions of dollars of executive talent at only a fraction of the cost to hire this level of talent. In creating this kind of forum, the owners come up against those who have had different, complementary and sometimes broader experience within or outside a particular industry, thus leading to a more thorough consideration of issues, decisions and financial management.
Advisory Boards create a forum in which active owners, in concert with advisors, impact the strategic issues facing the company. Owner decisions become less insular, often tempered by the broader perspective of Advisory Board members. Advisory Boards have no formal, legal function. Members do not have any fiduciary exposure and thus have no legal exposure when serving on such boards.
In my next post, I’ll talk in more detail about Advisory Boards.
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Family Business Matters has extensive experience assisting family businesses. With many decades of experience, we understand the wide variety of challenges that families face as they work together to build, grow and sustain a thriving family business generation after generation. Through conferences, continuing education programs, family business retreats, speaking engagements and private family business consulting services, Family Business Matters has assisted more than 450 family-owned businesses around the world chart their way through family business issues of all shapes and sizes.
For more information on how Family Business Matters can help your family business survive and thrive, please contact us today at (970) 948-5077.