The need to have a Directory in the family business

10 Oct The need to have a Directory in the family business

Family businesses go through different stages of growth and professionalization as they consolidate in the market, and the family grows.

The founder who initially had few workers, was relatively young, single or with few years of married, with the passage of time now lives a more complex reality since it has to balance two systems with different purposes: the company that possibly has several businesses diversified, professional workers, more demanding clients and, on the other hand; a family with grandchildren, married children, and even family members who work in the company.

It involves a complex situation because you have to ensure a balance between both systems so that they do not harm each other. It is no longer possible to govern the family business “alone”, more “heads” are needed to provide advice, experiences, and support to the general management to boost the growth of the company and consolidate or increase the family unit.

In a study I did a few years ago about the main challenges that family businesses have in Peru, the following stood out: governance system, succession and the transmission of entrepreneurial spirit to the next generation.

The system of government is very important to achieve a balance between family and business. The Board of Directors is the body where government decisions are made, initially they are only made up of the family that runs the company, but to the extent that decision making is hindered by excessive trust, emotional charge or lack of order among members of the family to manage the sessions, external directors are required to provide objectivity to the personal interests of some family members, help define clear rules of the game, and formalize the board of directors as a governing body.

In my experience as director of family businesses, I have seen the importance of taking seriously the role of the Board of Directors with fixed sessions, with a clear agenda with topics specific to the Board of Directors (company matters and not the family) and a record that allows the follow-up on what has been agreed, it may seem obvious but it is not easy, it is a learning process for the family that is in the direction and that demands more formality, discipline, leaving aside emotional impulses, resentments, interest in power, etc. ., in order to ensure the interests of the company that has provided them with the means to carry on the family.

On the other hand, this process of learning and training as directors also involves having the real economic information, defining clear objectives, and choosing the most appropriate independent directors for the family business, who share the values, communication styles, confidence and provide the criteria to make more accurate decisions thanks to their knowledge and experience, and above all that they know how to deal with family businesses, which allows them to separate what corresponds to the business scope of the family.

I encourage family businesses to evaluate the need to have a Board of Directors, at the beginning it will not be easy, but over time they will see that important decisions will be more valued and taken on time, it is part of professionalization.

The independent director is the midpoint and facilitator that will complement the internal intelligence, and that will take a fresh and different vision that can arbitrate the differences.