More than a quarter (28 percent) of respondents from family-owned businesses indicated that they do not have a board of directors. Additionally, a significant majority say their boards have no term (82 percent) or age (89 percent) limits on membership, and one-third do not evaluate or provide any compensation to board members. While it’s good that almost 75% of family-owned business do have a board, it must also be noted that almost half indicate that family members comprise a majority of those boards, leading to potential conflicts of interest in governance.
From the Deloitte Press release "Family-owned businesses are a huge component of the U.S. economy, and their attention to good governance practices can have an impact on success and failure," says Tom McGee, national managing partner of Deloitte Growth Enterprise Services, Deloitte LLP. "Tapping into the insights and experiences of an engaged, diverse, and independent board can yield significant operational advantages in the long run. Given that these companies are considered engines of job creation, a sharper focus on governance is important to their longevity, and to the success of our economy as a whole."
Succession planning can be an uncomfortable topic and often relegated to the 'only when we have to' conversation pile. The difficulty is that it usually involves a health crisis, either for the family or the business. In that moment, unless you’re cool under pressure, operating in crisis mode leads to bad decisions or compromises that can undermine decades of work. Successful transition can occur in those instances but a well thought out, planned transfer can lead to a seamless, and worry free validation of leadership that strengthens a company for the future.
Some things for current leaders to evaluate:
- Do we have a consistent, well understood and communicated vision for the company?
- What strengths and talents do I bring to the job?
- Do those strengths exist in an individual or select group of individual in the company?
- What professional development is needed to build those strengths?
There are so many things to consider, but the most important thing is to do something. Being prepared, at least knowing what questions to ask and how to find the answers, puts you in a better position to act. In business, it’s less about survival of the fittest, and more about survival of the flexible. The better your planning, the more stable and better positioned your company for the next generation.