By Jeanne Reaves
Both family businesses and private companies tend to struggle with the decision of when and why they should bring outside professionals on to their boards of directors. It’s not uncommon for us to hear things such as:
“Should I have a board that includes outside directors? Why?”
“I don’t want someone telling us what to do. What if they take over and we can’t do what we want to do? Will they slow us down?”
“It will cost us money to put outside board members on our board, and we will have more work to do. Will they want to look at our company financials?”
“Who would we ask to be on our board?”
We have heard these questions, concerns and reasons time and time again about why companies believe they should — or should not — have outside board members.
I have had the honor of sitting on a couple of family owned boards, and have immensely enjoyed the privilege of doing so. I haven’t chosen to do so based on any of the reasons suggested above. Rather, I have done so because I believe I bring an opportunity for the CEO to ask for advice, provide a different perspective all while remaining objective because I am not wrapped up in the internal operations of the company.
Outside board members enjoy and feel good when a CEO asks questions that complement their experience. It helps the CEO make objective decisions — having someone they can bounce a problem off of, as well as see all sides of a problem and help find the best solution. For me, having a banking background in addition to strategic and leadership skills-set, I have been able to provide an outside perspective that has helped identify strengths, or something the CEO might want to be aware of. Candidly speaking, I may initially question something, but it truly is for the good of the company. Creating an opportunity to broaden a company’s perspective is helpful and provides the CEO an opportunity to both weigh and debate the facts from knowledgeable people who are on their side.
Statistics show there are a higher percentage of companies that make it through a crisis and a downturn in the market with outside directors. Remember, board members do not manage the company they ensure the company is well managed. A board of advisors may be something to consider in a family or privately held business. It’s important to talk through the objectives and the skill set of who you would like to invite on to the board and why.
For the benefit of this strategic initiative, I asked FBA Past Chairman David Lucchetti, President and CEO of Pacific Coast Building Products, a family-owned business, why they have outside directors.
“I think it’s important because an outside board member offers a different business knowledge and an outside perspective,” Lucchetti said. “This outside perspective helps provide a good checks and balances system. They can help the family business to see beyond what they’ve always done by raising important questions, and helping the business make future decisions.”
Jeanne Reaves is a Regional Sponsor of FBA and provides consulting services to family businesses. For more information, visit the Jeanne Reaves Consulting website.