Family Business Tools:

1
Family Business Tools Family Meetings,
Advisory Boards and Boards of Directors
Presented by Work Volf Consultants, LLC
College of CharlestonRoom 301 Beatty Center
2
Youre not in this alone Family Owned Businesses
in America

• About 90 of all U.S. businesses are family owned
  or controlled.
• Sizes range from the traditional small business
  to a third of the Fortune 500 firms.
• They generate an estimated half of the countrys
  Gross National Product and half of the total
  wages paid.
• Less than 1/3 survive the transition from 1st to
  2nd generation ownership. Of those that do, about
  1/2 do not survive the transition from 2nd to 3rd
  generation ownership.
• Source Small Business Administration Nancy
  Bowman-Upton (1991)

3

• Common Family Business Issues, Deciding
• Who will participate in the business
• How leadership and ownership will be transferred
• How to help the founder change roles or leave
  the business
• About liquidity and estate taxes
• If and how to attract and retain non-family
  executives
• About family compensation equity (genes) or
  merit
• How to choose successors
• How to strengthen family/shareholder harmony
• Source Small Business Administration Nancy
  Bowman-Upton (1991)

4
Communications, conflict resolution and decision
making require TOOLS

• Formalized structures
• Agreement about how to do these actions
• A safe environment in which to conduct the
  business (often requires a neutral facilitator)
• Separation between business and family
• And what else?

5
Hold FORMAL family meetings for business How do
they work? (See Handouts 1 and 2)

• Whos in charge?
• How are decisions made?
• Whats on the agenda?
• Who should attend?
• Is the subject matter BIG? What about a retreat?
• What are the rules? Be on time, be prepared and
  listen.
• What happened? What decisions were made?
• Whats next?

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Consider having an outside board why?

• Help to clarify the issues to be studied
• Provide an objective analysis of alternative
  scenarios
• Help refine future strategy
•  Helps diffuse the situation and point in the
  right direction
• May have already had a similar experience in
  decision making
• Helps the family get past gut feelings and
  emotional judgments to design a process to
  systematically weigh alternatives and study
  ramifications
• Helps keep the family focused and define
  boundaries between family and business.
• Provide unbiased views, force accountability and
  establish networks of contacts.
• Provide new standards of performance
• Source Sustaining the family Business by Paisner

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A great Board of Directors brings great results!

• Provide continuity for the organization by
  setting up a corporation or legal existence, and
  to represent the organization's point of view
  through interpretation of its products and
  services, and advocacy for them
• Select and appoint a chief executive to whom
  responsibility for the administration of the
  organization is delegated
• Govern the organization by broad policies and
  objectives, formulated and agreed upon by the
  chief executive and employees, including to
  assign priorities and ensure the organization's
  capacity to carry out programs by continually
  reviewing its work
• Acquire sufficient resources for the
  organization's operations and to finance the
  products and services adequately
• Account to the public for the products and
  services of the organization and expenditures of
  its funds.

8
Boards inFamily Owned Businesses

• More than 1/2 of the respondents describetheir
  boards as strong and positivecomponent of their
  company.
• More than 1/3 (36) rate the contribution as
  good, and 22 recognize board performance as
  outstanding.
• But a substantial percentage of respondents
  report weak board performance. Fifteen percent
  regard board contribution as fair, and 2 rate
  the boards contribution as, poor. Twenty five
  percent cite no contribution.
• Source American Family Business Survey by
  Massmutual Financial Group/Raymond Group (2003)

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Another Type of Board Advisory Boards

• A Board of Directors is legally constituted
  and has voting and decision-making powers.
• An Advisory Board is not governed by legal
  statute and can operate pretty much however you
  need or want it to.
• Think of it as being like an organized group
  of consultants.
• Source Sustaining the family Business by Paisner

10
Count the waysThe benefits of Advisory
Boards (See Handout 3)

• High powered talent and expertise not available
  in house
• Data based, objective evaluation of needs,
  talents and opportunities
• Assistance with tough decisions about business
  and family
• Strengthening of business planning process
• Objective problem solving
• Guidance for enhanced, innovative strategy
• Objective assessment of family members and key
  non-family personnel performance
• Source http//www.family-business-experts.com/adv
  isory-board.html

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Forming the Advisory Board The how to

• Duties. Incorporate into job descriptions.
• Leadership. With smaller family businesses, the
  CEO. Over time and with increasing size, an
  advisory board can develop its own leader.
• Size. Whatever you need to get the job done.
• Authority. Advisor needs authority consistent
  with duties.
• Relationship with employees. Defined by job
  description.
• Meetings. Frequency and formality delineated by
  advisory board and organizations needs.
• Compensation. Costs to attend meetings and
  promote the business should obviously be
  reimbursed. As for pay, probably the best
  guideline is that "you get what you pay for.
• Source http//www.family-business-experts.com/adv
  isory-board.html

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How can you make the most of these tools? Its
your turn!

• Formal Family Business Meetings
• Board of Directors
• Advisory Board