We often hear from management that board meetings are “a waste of time” where directors “don’t really understand our business” and “don’t contribute much to enhancing our strategy.”
That is unfortunate.
Yet in many cases, the primary source of the problem is not poor director choices, as much as poor management preparation for board meetings.
Directors generally are sincere in their wishes to add value and make a difference for management and for the business. They also typically bring deep experience across multiple businesses and industries. So how is it that they attend board meetings without bringing significant value? There are a number of things that directors expect (or at least hope for) from management in order to help ensure that they can contribute real value.
Below is a list of considerations for management as it prepares for board meetings:
Is enough time allotted for the board meeting? (Most effective board meetings are at least a full day in length.)
Does the agenda indicate enough specificity in terms of what directors should give thought to before the meeting?
Do you allot sufficient time for strategic discussions (versus financial review, operational problems, or regulatory issues)?
Have the directors received the completed board packet information at least one full week (and preferably 10 days) in advance of the board meeting?
Is there a cover page to each section of the board packet which summarizes the key issue(s) and the key questions that management would like directors to be prepared to discuss?
Is management prepared to discuss the issues without running through slides that the directors have already read in the packet?
Directors aren’t perfect and sometimes, poor director choices are made. On the other hand, it is probable that management can step up its game in terms of equipping directors to contribute more meaningfully in board meetings!
Many of our clients develop a family employment policy as part of continuity planning. Some of the components of this policy articulate the circumstances under which family members will be hired, compensated, appraised, promoted, and terminated. And often we are told that the family business must remain a meritocracy, where family members earn their positions, and should be treated the same as non-family employees.
This philosophy seems appropriate when often there is much at stake and all employees need to be competent and held accountable. Also, non-family employees want to see that there is opportunity for them, even when their last name is not on the door. Family businesses should be run professionally in order to perpetuate the business through future generations.
That said there are times when exceptions to employment protocol might, and even should be made. Vacation time is one topic that often comes up when next generation family members join the business. They are often just starting their careers and take a position that offers two weeks vacation. However in some cases family members are given one or two additional paid weeks vacation. Senior management permits this for a number of reasons that are in fact, defendable:
The family may have meetings about the business while they are on vacation.
Junior generation family members are often expected to take courses or attend conferences that are family-business related. These courses often take place on weekends.
Family members are often invited to weddings and other events hosted by co-workers or family business associates, that require travel on weekends. Often junior generation members are strongly encouraged by their parents and/or senior management to attend these events.
There are often ceremonies and celebrations that are business related, and family members are expected to attend as ambassadors of the business. These events often take them away from their families if travel is required.
Community events sometimes require representatives from the business to attend. These are typically in the evenings and again, are responsibilities that family members take on in addition to their day to day work responsibilities.
While all employees sometimes make commitments on behalf of the business that are outside of regular work hours, often for family members it adds up to several days or even weeks in a year. Therefore, consideration is given to additional vacation time in an effort to make up for the significant investment made to work related commitments.
I recently read the book Essentialism by Greg McKeown. It is an insightful read for those who feel chronically time-starved, stressed, hurried, and dissatisfied with how much remains undone. McKeown suggests that we adopt a “disciplined pursuit of less” in an effort to ultimately be more productive, and to contribute to our personal and professional world in the most meaningful way.
This does not mean doing less as much as making more discerning choices from options that matter most to us. He describes a process of learning to identify between the “vital few and the trivial many.” Working in a family means diverse source of stress, and this book provides some very helpful considerations that may help you make optimal choices in your management of life!
When people think of the Chair’s role during a board meeting, they often think of responsibilities such as introducing each topic on the agenda, asking managers to make pre-arranged presentations, soliciting comments from the directors, and managing the time used for each topic. Those responsibilities indeed typically belong the Chair of the board. However, if that is all the Chair is managing, he/she is potentially missing opportunities to create optimal value from directors’ participation. In addition to those responsibilities the Chair should consider the following questions when conducting his/her own self-evaluation.
Am I really listening, in an active, engaged way to what is being said?
Am I able to distinguish input that is truly strategic and critical from the many comments that are much less impactful to the business?
Can I synthesize the information and comments being shared at the board meeting and distill them into appropriate, resonant themes?
Do I effectively share back with the board (and management when appropriate) the meaning or impact various discussions and suggestions may have on the business moving forward?
Can I communicate this in a way that is actionable to the appropriate people?
If your answer to these questions is “yes”, then congratulations, you are likely a very effective board Chair! If your answer to some or all of the questions is “no”, then you have some opportunities to strengthen your own performance, and ultimately enhance the value of your board.
Most organizations with fiduciary boards have a tradition of management presenting a prepared strategic plan to the board for approval. Management’s role has been to complete the plan before discussing it with the board. There is a clear distinction (and needs to be) between providing oversight of the business and running the business.
At the same time, reaping meaningful value from your board is typically a function of how well they understand the business. And one way to enhance that understanding is by further engaging the board in the strategic process. Some boards will participate in an annual two or three day strategic retreat, where management has developed the core elements of the plan but discusses it with the board as a work in progress, rather than a fait accompli. This engages directors in important discussions about future growth, capital needs, resource allocations, and risk management. The discussions at this earlier stage help shape the plan, and further ferret out the implications of strategic options. There are other ways of getting directors more engaged around strategy, such as interim discussions with individual directors, whose specific expertise can help develop elements of the plan. This is a great board agenda item – if you think directors can add more value to strategic development, ask them how they feel they might do this moving forward, and develop a plan for their participation!
Are you developing a successor for your position, with the objective of transitioning out in the foreseeable future? If so, you have likely experienced the apprehension and emotion associated with that process. We have worked with leaders who identify a transition date and others who have not, with successful outcomes in both scenarios. That said, we encourage you to think about identifying a specific transition date for a number of reasons:
It sends a message to your successor, your employees and other stakeholders that you are serious about the transition;
It motivates you to develop key milestones in the process that need to be met in advance of that date;
It prompts your board to set expectations for progress reports along the way, and provides you with a source of feedback on that progress;
It helps you envision and plan for your role beyond that date – perhaps as board chair, as a retiree, as a leader in a new capacity;
It sets in motion a variety of other decisions throughout the organization that help prepare for the transition.
Setting a transition date is definitive, and makes it very real, and perhaps a bit scary. Yet if it doesn’t feel real to those around you, the energy invested in the transition might be insufficient to meet your expected outcomes. This might be the biggest business decision you ever make; setting a transition date is one of many steps in ensuring transition success.
When you sit down with your existing board and/or management to discuss what you are looking for in a new director, it’s likely that you create a list of skills and experiences that you feel a director should possess in order to add value to your board. That makes sense. Specific industry knowledge, skills such as corporate finance, marketing, operations, perhaps experience in negotiations or government relations might be of value to the board.
We encourage boards to also spend time identifying personal attributes that an effective director should possess. What type of person might best integrate with the culture in the business and perhaps the family? Are there specific personality characteristics that you know might trigger conflict or unease with the board? Do you have a culture of inclusion that allows for input from every individual at the table, regardless of their background or level of understanding? Do you make decisions as a board that might subordinate profit to other considerations that are important to the family (such as community philanthropy, or care for family members in need? These questions prompt you to think about what kind of director might be most compatible with your board. You might find a director candidate with the right skill set and relevant experience, but they are driven exclusively by bottom line results. They might have little or no tolerance for tailoring executive positions to the needs and talents of family members. Or perhaps their ego requires more ‘air time’ in the boardroom than is appropriate.
If you are looking at director candidates, look beyond the skills and experience base they bring – ask yourself about the cultural and chemistry ‘fit’ with the group before you make a commitment that is tricky to undo!
Junior generation family members sometimes tell us that they believe no decision-making authority will come to them before senior generation family members either exit the business or die. And in some cases, they’re right. That is somewhat discouraging, and also a deterrent for next generation engagement.
We have found that decisions are difficult for the next generation to manage when their “transition” goes from making no decisions to making all decisions.
Why not provide the next generation with opportunities to make decisions (either related to the business or the family) before you make your exit? You might not want to start with key strategic decisions, or life-altering decisions on behalf of the family, but there are many options. Here are some examples:
Planning the next family meeting (location, social time, draft agenda);
Making a hiring decision without your stamp of approval;
Designing a family website or newsletter;
Selecting his own mentor in the business;
Choosing recipients of philanthropic donations;
Setting up a pilot project for a new product or service;
Identifying development workshops/conferences that are most appropriate for her generation;
Make some investment decisions with other members of the junior generation with a fixed sum of money;
There are many opportunities to build confidence and establish credibility among the next generation through increased decision-making. What decisions can you identify in your family that might engage them, while developing decision-making competence?
The work associated with being a member of your Family Council is significant. You are representing the larger family, and committing to work with the leadership group as they develop and implement specific initiatives. Family Council work is often meaningful and rewarding. At the same time, it can feel burdensome, tedious and thankless. Family Council members do not always get much reinforcement for their work, and it is not uncommon for Council members to reach a burnout stage during their tenure on the Council. There are a few things to keep in mind that might help manage potential burnout:
Develop a plan for the next one to three years that maps out overarching objectives and specific initiatives for the Council;
Work to develop a set of actions that you can actually achieve, with the limited resources (typically human resources) you have available;
Be sure to engage with and manage your Family Office resources optimally;
Do no hesitate to selectively reach out to family members not on the Council to provide their expertise and support for specific projects;
Ensure that Council members communicate regularly on progress, and instill some accountability measures for follow-through responsibilities ongoing.
These are just a few suggestions for Family Council members to consider as they navigate the diverse and expansive responsibilities of a critical governing body.
Many of our clients have either transitioned to, or are in the midst of transitioning to a more professional board, made up of both family members, and independent outsiders. Based on a survey we conducted with business owning families, there is a clear distinction between the rated “effectiveness” of a board with just family members (47%) versus those with either a minority, or majority of independent board members (91% versus 100% respectively).
This is telling, and may foster further interest and/or action in moving forward with an independent board. Yet, that transition by itself will be insufficient to produce an “effective” board. Boards (Advisory or Fiduciary) add value for a number of reasons, and composition is just one reason for the value boards bring to shareholders. Below is a list of other important variables that influence the effectiveness of your board:
A clear, specific agenda that outlines both the content and the purpose of each board topic;
A board packet that:
Includes all the pertinent information board members require (no superfluous, ‘thrown-together’ information, but a collection of succinct, meaningful data);
Focuses the readers’ attention on the two or three critical strategic issues that will be discussed at the board meeting;
A packet that arrives at least one week in advance, so the board members can adequately prepare for the meeting, and organize advance phone calls with questions if necessary.
Some social time to set up a ‘rhythm’ for the actual meeting – typically a dinner the night before the meeting.
A strong Chair – someone who not just moves the group along from one topic to the next, but someone who can listen to, understand, assimilate, and feed back to the group the meaning of what has been discussed, and what implications those discussions have for future action.
It is tough to fit ALL of the components of a successful board into a blog. But this provides a quick summary of items to think about when developing and managing your board for optimal value.