"I'm wondering if it's time for us to add outside experts to our advisory board," Julie Jacks mused aloud to her cousins. "Experts who would bring fresh ideas and who would have some gravitas around here." Julie and her cousins were gathered at the brown-bag lunch session they held each week in order to connect, share ideas and concerns, and offer updates on their various lines of business. Since last year's leadership transition to their generation (the third), they'd used this casual forum to strategize how to work most effectively together as the next generation family leadership team. They felt they had been able to solve some important problems and had headed off a number of others via their weekly tête-à-têtes.

 

Now, however, they were facing increasingly erratic behavior and peremptory decisions made by Barry, former CEO and second generation family member. Though Barry had voluntarily assumed a secondary title (and role, ostensibly) in the company, he was still seen by some employees and managers as the point where the proverbial buck still stopped. This, plus his own habit of taking charge, was causing confusion and consternation among employees and managers alike, and it was concerning to this next-gen leadership group.

 

Despite carefully constructed conversations during which the cousins in leadership roles discussed with him their concerns—both for company morale and its long-term viability—Barry continued to make decisions without going through agreed-upon channels. This resulted in the cousins feeling they were spending too much time picking up pieces and re-setting direction within management meetings. Might they be helped here by the extra insight and leverage of an advisory board with extra-familial membership? The cousins debated pros and cons, as well as possible roadblocks that would likely be raised should they push for this change.

 

The Jacks' family business did have its legally-required "board," consisting of managerial level family members and two key non-family managers, which met quarterly to discuss larger financial decisions and strategic direction. However, Barry Jacks' strong presence had no real counter-force, and these board meetings often felt like a rubber-stamping of his decisions rather than a robust discussion of ideas, strategies and challenges. This board had not truly been able to exercise advisory capabilities. Maybe, Julie and the cousins thought, it was time to add some independent advisors to the board.

 

Most family enterprises reach a point when a board consisting only of family members no longer serves the interests of the family business or the family itself. Often, this occurs when intergenerational role transitions are underway. Succession may be unclear, with power and responsibility murky, or the next generation of leadership may want to grow in new directions, needing outside-the-family-box input.

 

Developing an independent board of advisors, with members who are not part of the family, can offer many benefits, including:

 

Developing an advisory board is an important milestone in a family enterprise, and is best done with sufficient deliberation and time to allow for family clarity and buy-in. The family must first agree on the purpose of the board and the form it will take, and why, before clarifying whom they’d like to include as new members. The process of onboarding new board members and setting their direction is also critical to their overall success. In the end, families who take this important step find themselves supplied with resources, wisdom and expertise to assist them in reaching their next level.

 

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Kristen Armstrong, Ph.D., is a Strategic Wealth Coach for Ascent Private Capital Management of U.S. Bank. In this role, she facilitates family discussions around leadership, communication, succession planning and governance. Kristen assists families in making their ways through important transitions, and developing skills and awareness to enable growth in both family relationships and family enterprises.