Tag Archives: schwarz

Great boards do exist!

Norb Schwarz

In our work we sometimes come across a board that is working exceptionally well and adding substantial value (both financial and organizational) to the business and for the shareholders. I have been fortunate to work with a number of such boards. Following are some common characteristics I have found in these highly functional boards.

  1. Majority (usually minimum of three) experienced independent directors.
  2. Commitment from shareholders and management to welcome independent perspective and insight.
  3. Director commitment to prepare for meetings and to be available outside of meetings.
  4. A minimum of financial/audit – compensation – and governance committee functions.
  5. A knowledgeable and committed Chair who is willing to take responsibility and grow with the job.
  6. Effective board structure and process.
  7. Positive synergy among all board members.
  8. Strategic focus.
  9. Open communication.
  10. Willingness to make difficult decisions.
  11. Management and shareholder willingness to accept board decisions.
  12. Director familiarity with shareholder expectations and senior management capabilities.

This is certainly not meant to be an exhaustive list, and we would be interested to hear your thoughts or experience with board effectiveness.

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Accountability: “Evaluate to improve, not to prove.”

Norb Schwarz

A young next generation executive working for the family business her father founded recently told me that lack of accountability among family members in the business was hampering the successful transition of the company to the next generation.

Unfortunately her comments mirrored those of other clients who have had difficult transitions due to apparent lack of accountability. Why is accountability such an elusive issue in many family businesses?

Perhaps it is because accountability is thought to be synonymous with “consequences” and thought of as punishment for failing to accomplish a task.  Yet, if we looked at accountability with a different lens, perhaps some of the barriers to its acceptance might be torn down.

Rather than looking at it as a way to impose consequences or punishment for failure, we should be welcoming accountability as a process that offers an opportunity to learn and improve on results that are both positive and/or miss the mark. Clear communication of agreed upon goals and measureable benchmarks to achieving the goals are prerequisites for the successful integration of accountability into a positive culture for the family business. With this positive process in place it will be much easier to establish a meritocracy based on accountability as opposed to an aristocracy.

“Evaluate to improve, not to prove.”

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Five Reasons People Don’t Perform

Norb Schwarz

Perhaps the most difficult job I had as a manager was to complete timely and constructive employee evaluations. As I struggled with the process, it struck me that there were five primary reasons people did not perform satisfactorily in any job. 

  1. They did not know what to do. This is a shortcoming of communication within the company.
  2. They did not know how to do it. This tends to focus on shortcomings in the training area.
  3. They did not have the resources necessary to do the job. This is a matter of allocating the proper resources within the company.
  4. They did not want to do the job. This is simply a matter of appropriate motivation. And,
  5. They couldn’t do the job if their lives depended on it.

Nearly all of my employees who were not performing satisfactorily were in the first four areas. Management shares responsibility with the employee in the performance of the first four shortcomings. It will require a joint effort of management and employee to bring performance up to satisfactory standards. If an employee fell into the fifth category, the handwriting was on the wall. The employee had to be let go for the benefit of both the employee and the company. 

Once I began to see the performance management process in the light of a joint responsibility, it was much easier for me to utilize the process as a productive tool for the growth of both the company and the employee.

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Letting Go

Norb Schwarz

I often think of the time when I was just beginning my banking career, had a growing family, and was working toward my master’s degree at night school. After several years of multi-tasking, I went to my boss and asked him if getting the degree was worth it. His short answer was “yes”, but it was a comment he made in support of his advice that has stayed with me and served me well over my half century in business.

He said “Norb, never leave anything, always go to something better”. His advice has served me well over the years. As I work with senior generation family business owners who are transitioning the business to the next generation, I can see that those who have identified something to transition into are much more likely to be able to let go of their role in the business. Whether it be lowering your handicap in golf, teaching, serving on other company boards, philanthropy, community service, spending more quality time with your spouse and family, writing, painting or just doing those things you have always wanted to do, successfully transitioning the business shouldn’t be viewed as leaving anything. It should be viewed as going to something better.

LETTING GO

When I let go of what I am, I become what I might be.

When I let go of what I have, I receive what I need.

By yielding, I endure.

When I give of myself, I become more.

When I feel most destroyed, I am about to grow.

When I desire nothing, a great deal comes to me.

Author unknown

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Return on Board Investment

Norb Schwarz

Recently one of the national business news programs asked its audience to call in to vote on whether public company boards are worthwhile or worthless. Commentary suggested that in many cases public company boards were headed by CEOs who were also the Board Chair and questioned whether a board under such leadership could be truly independent with primary loyalty to shareholders. The implied conclusion was that such boards have limited shareholder benefit.

That conversation caused me to reflect on the many family business boards I have had the pleasure of working with. Many of those boards included independent directors, some boards having a majority of independents.  Like some public company boards, some family business boards might be considered a waste of resources and others return many times the investment to the family shareholders. Interestingly, in my limited personal sample, the boards chaired by someone other than the CEO or those with an independent lead director tend to offer the greatest return to the shareholders. These high return boards have much in common. Among their many attributes, these highly productive boards had the following characteristics:

  • They are truly independent in that their qualifications were based on the skills they brought to the table.
  • The boards have a majority of truly independent directors.
  • They were not known personally to any shareholders until they were interviewed for the board positions.
  • They work well together as a group and respect one another’s contribution to the board process.
  • They respect the family and offer challenging support to management.
  • The independent directors meet regularly as a group.
  • The board engages in independent evaluations of its own effectiveness at least bi-annually. 

In conclusion, let me be quick to point out that the return to shareholders I refer to may not be a financial metric in all cases.

My sincere thanks go out to those independent directors who continue to give their best to our family businesses.

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