|A Best Kept Secret
|Advisory boards are one of the best kept business secrets. Not to be confused with a board of directors, this team of individuals does not have the authority to vote nor does it have any legal or financial responsibility in the company. Instead, they apply their area of expertise to provide valued insights and techniques that will help guide the company into a sustainable future.
According to a 2014 study commissioned by the Business Development Bank of Canada, an advisory board can boost a company’s performance in several areas, including innovation, risk management, sales and productivity. For family owned businesses the benefits are even greater, as these individuals can provide both the insights and objectivity that could aid with conflict resolution, continuity planning and talent development.
Seeing the Whole Picture
The dynamics of family business and navigating through family relationships, including transitioning between generations and leadership development, adds complexity. Previously established communication patterns have an impact on being able to objectively review and relay information. Parents may struggle with releasing their reins to the children, while the next generation may quickly dismiss their parent’s insights as dated.
To move forward, the family enterprise needs to understand what factors may be holding them back. However, these insights can be extremely challenging to address when emotionally and financially enmeshed in the situation. An advisory board can provide that objectivity, pointing out potential biases while providing the tools and techniques that will help mitigate them. Overall, it encourages a company to become more self-reflective while encouraging businesses to adopt long term thinking.
Tackling the Talent Pool
Making the decision of who will take over the reins of the business is extremely challenging, particularly, when there are multiple family members vying for the position.
Personal relationships could impact the current owner’s analysis on whether the next generation has the talent and ambition to move the business forward. The key to this successful transition is remaining as objective as possible. However; how do you remain objective when you must choose between your son, daughter, or niece? This is where Independent advisors can step in, providing not only an outsider’s perspective, but also helping the existing owners establish an effective process to objectively review the current talent pool.
Advisory boards, however, aid in so much more than continuity planning. This trusted group of individuals can help guide strategic processes, provide effective techniques for communication, and apply objective judgment when it comes to providing input on talent. Overall, these skilled independent voices can furnish insight and advice to successfully propel the business into the future.
According to Statistics Canada, in the first three years after an advisory board was set up, sales grew 66.8% compared with a growth of 22.9% in the three previous years. Overall productivity was strengthened, rising an average of 5.9% compared to 3.2% in the three years prior to the advisory board being established.
Filling in the Gaps
It is virtually impossible for an ownership team to have all of the skills and knowledge required to navigate the evolving world of family business. Human resources, legal, and sustainability initiatives are all areas where businesses require insight but not may have the internal skill set to successfully navigate through these areas. Advisory board members could help fill in these missing pieces in the leadership team, providing their expertise to help inform decisions. The advisory board, however, should not be a replacement to the talent and skills required for the day to day operations of the business.
Not Just Anyone Will Do
For advisory boards to be effective and respected, the ownership group should be looking for individuals who align with its company’s values. The formula for selecting advisory board members begins with competence, but also includes a balance of character (having similar values), communication skills (being able to appropriately relay information) and confidence (able to submit critical, if controversial, observations). While shared values and confidence builds trust, the ability to communicate sensitive or at times, unpopular advice is perhaps the most valued. This independent voice can bring to light, what the family may not be able to admit or see themselves.
The key is that these individuals understand the business within the context of a family enterprise. The ideal individuals would understand how to sensitively relay information and find ways to negotiate the differences amongst the family members. Character and competence are the foundations of trust, but it’s the advisor’s communication skills and situational sensitivity that improves the chances that their insights will be not only understood but taken under consideration.
The Value of Peer Insights
Some businesses may not be ready for the structured experience of an advisory board but still want to benefit from external insights. In these cases, structured peer to peer groups or a certified family enterprise advisor that focus on the pain points of family businesses, may offer a better fit.
Family Enterprise Xchange’s Personal Advisory Groups (PAGs) are structured to provide both education and experiential learning that help owners overcome the challenges. Due to their confidential nature, the PAG provides another level of support that helps participants work to resolve both family and business issues in a supportive environment, leading to more positive outcomes on both sides.
Like a formally structured board, the peer to peer advisory group members should be vetted for any potential conflict that could comprise their objectivity. This includes ensuring that family members, pre-existing business relationships, and competing businesses are not placed in the same group. The intent should be to help businesses through experiential learning, overcome the challenges and navigate issues that are unique to the context of family businesses.
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