Here's How a Board of Directors Should Function (Family Business)



Essentially a Board should include executives whom you respect and who have the business and personal experience relevant to the key issues that the business must address. Their only interest in your business is that the business is profitable, grows stronger and lasts longer. Here are some attributes to look for when selecting 
people to serve on your Board: 


Every advisor should have specific experience in at least one area to benefit your business. Areas of expertise include technical knowledge of the product or service, manufacturing, distribution, marketing, human resources, finance or management. 
It is often helpful to have someone with experience in the same industry. 

Willingness to serve  

Many business executives would be flattered to be asked to serve on your Board as they would consider it a personal and professional challenge and a way to give back to the business community. Others would not. 

A highly qualified person may serve no useful purpose if he or she had to be coerced into serving. Limit selection to those who genuinely want to serve. 


It is essential that your Board members be independent thinkers with strong opinions, particularly in dealing with family business, where issues can get very sensitive. That is, they will need to be able to cut to the point. 

Time and commitment  

Be careful not to select advisors who are likely to miss meetings or be ill-prepared when they do attend. Advisors should be willing to read relevant information, trade publications and other items necessary to stay abreast. Each advisor should contribute agenda items and be prepared with questions to ask management 
when appropriate. 

Basically, a good Board provides knowledge and objectivity to a family business. Also a good Board maintains company strategy and continuity, and it ensures that there are Board meetings, which are essential venues for communication and planning. The directors are also there to serve as emotional sounding boards to the business leader when he or she is confronted with a serious moral dilemma regarding his own job performance and the performance of the designated 

In companies with multi-generational owners and operators, the outside directors assist in the perpetual search for consensus. In cases where some family members 
are in the business and others are not, outside directors can help set consistent policy regarding issues such as dividends, titles, compensation and performance. 

Furthermore, an impartial review by outside directors can go a long way toward ratifying the decisions in these areas. Benefits an outside Board can provide to a family business: 
> ideally, the members bring a wealth of varied business experiences so that, when brainstorming ideas and exploring possibilities, they can each provide a fresh perspective 
> with no vested interest in you or the business, an outside Board is your best source of honest, objective feedback and opinion 
> they clarify roles. Family-business leaders often confuse their various roles as family members, company managers and business owners. Directors can help the 
owners to recognise which roles they are – or should be – playing when the lines get blurred 
> by their very existence, outside Boards hold you accountable. In so doing, they generate higher standards and better performance 
> they can provide the necessary stimulation for risk taking in business. With the affirmation and moral support of the Board members, business owners often experience increased self-confidence to take new risks. 

Boards are also important in some intangible ways as well. A Board of directors is often a symbol of growth and progress. A family business with an outside Board is making a statement that it is open to new ideas, that its leaders are seriously interested in its own betterment and that they are putting thought into the succession process.