Ram Charan has some good advice in his book “Boards That Deliver.” In it he lists what the top subjects of focus should be for effective boards. Not surprising to many of us, the number one priority he identifies is: “Do you have the right CEO…”
In public and private companies, boards are too often lax in their responsibility of reviewing, evaluating and developing management at the top. Whether a family member or not, all boards should ask if the company’s leader is the best suited person for the job – bearing in mind the company’s current needs and strategic direction. If the answer is “no,” the board must look to make a change and shareholders should support the process.
When the business is family owned and managed, the most difficult leadership change decision comes when the CEO who needs replacing is a family member. Truly independent directors are critical to help all stakeholders navigate this challenge. While these directors must be wise in their judgment of the business’ needs, in order to really be effective in this delicate situation, they are ideally well known to the family and respected by all, as well as experienced with family business and sensitive to the concerns and needs of the family, in addition to those of the business. This awareness will not lead them to change their mind about what is best for the company – but will enable them to interact with the family, and communicate the needed changes in a manner that all stakeholders feel respected, which will help the family remain united, despite this needed business change at the helm.