Title: Family business advisory boards – Enables you make better decisions.
“I don’t want an outsider telling me how to run my business”.
I couldn’t tell you how many times I have heard that response from family business owners when I talk to them about implementing a family business advisory board/panel.
It is a typical response in a patriarchal lead family enterprise. In real life I have experienced it mostly in families business where there are two or more generations working in the business. I gave a presentation in a large regional town attended by about 150 from surrounding area farming families. What surprised me was the number of wives and daughters who approached me asking if I could help them talk to their husband/father to look at putting together a panel with external independent experts.
I also know from experience that some family businesses are more likely to have inter-generational emotional conflict between those family members working in the business.
My past and present history sitting as an experienced advisory board/panel member on family business boards/panels in Geelong, Ballarat, and the Wimmera with food manufacturing, small engineering, transport and local construction has proven that private and family-owned companies with an advisory board outperform those without one.
The primary value of a trusted advisory board member is to provide an independent source of information and advice to the owners on difficult strategic issues or risks confronting the business.
I learnt that lesson in my business with a sibling during 1980’s, Noddy’s Soft drinks in Melbourne and Geelong. It was only after we sold and I went on to manage a subsidiary of an Australian listed company that I saw the value of having knowledge, experience and wisdom around you to enable you make better decisions.
An advisory board/panel provides a different perspective on issues raised by the owners/directors based on insights and external experience and by being removed from the day-to-day operations.
Independent boards/panels are able to challenge the thought process and ask the right and difficult questions that are often overlooked because of the family emotions that guide and influence decisions.
I suspect the reason owners push back is because the business is often an extension of the family dynamics that exist outside the business.
My best example to demonstrate the benefits of an advisory panel was in a renown family hospitality service business where the father died and one of the children took control or maybe, I should say seized control and put the company into debt. The mother was advised to establish an advisory panel as she owned all the shares. We (The advisory panel) were able to remove the family member in control, bring in an experienced CEO and establish proper governance and controls through holding monthly advisory meetings and ensure the business was capable of surviving and provide ongoing annual dividends to the owner and other family members.
Bill Winter M: 0411 536 424
Here we are in the middle of the Latest COVID lockdown and family business owners are really hurting. For many, it has become critical to reassess their future survival and future opportunities. No one can be expected to operate successfully in business environment that is so unpredictable.
Not only do they tell me they lie awake worrying about future sales and cashflow, they are often leading a business based on personal emotions and complex interfamily egos, family turf wars and differing individual aspirations and personal ambitions. The shutdowns have now introduced a high level of personal stress and anxiety.
When the original founders started, usually as a husband and wife team, they only had themselves to consider and were often married to the business, working amazing hours. Now things are different. The family has grown and expanded and family group dynamics have come into play.
Following on from 2020, which we can only describe as the COVID year from hell, family business owners are faced with some key decisions they have never faced before. Business models need to change, supply chains have changed, consumer buying habits and attitudes have changed, the way we work has changed and technology is driving this at an incredibly fast pace.
In my work with family business owners, there are three fundamental questions. Especially since credible research from a large national accounting group and Family Business Australia indicates that only twelve percent of family businesses survive past the second- generation.
Family leaders must decide. Do we just continue as we always have done in the past? Do we look to find a buyer and exit the business? Do we, or can we, transfer and transition the business to the next generation and accept that change is necessary?
Recently, I have been involved with families in regional construction, hospitality, artisan food and local engineering who have struggled and cannot see a light at the end of the tunnel. However, there are others in food manufacturing who have been hit hard initially and then rebounded. The latter are examples of those who stopped and reassessed their situation, have been bold in making change and are now beating their pre COVID results.
My best example is a family business in agribusiness who initially lost sales and clients in 2020 and quickly brought the senior team together and decided to make some tough people decisions, reassess their channels to market, adjust their product range, raise their gross profit margins, upgrade their technology and revise their short term and long-term business gaols.
The lesson learned for family business is those who had always ensured they communicate with each other, have maintained cash reserves and a good balance sheet prior to 2020 have been able to survive last year and now have a chance for surviving past 2021.
Bill Winter is a renowned business mentor for business owners. He is a facilitator of the hard to have business conversations.