Serving on any board of directors or to cooperate with is hard, but in a family-owned business, it’s even harder.
Unlike their private-company counterparts, which focus mainly on increasing value, family-business boards must act on behalf of stakeholders with multiple and potentially conflicting agendas – for example, co-owners with equal power and completely opposing financial timelines. And because interpersonal dynamics in family businesses are much more complicated, discussions of critical issues like leadership succession, compensation, and the performance of management often become uncomfortable, messy, and emotionally fraught. It’s not unusual for family directors to shy away from them and, when they do, for the independent directors to follow their lead.
The board is almost evaluating situations on a case-by-case basis rather than forming processes, procedures, and rules.
It’s critical for directors to develop trust with one another; the company’s leadership, including both family and nonfamily members; and the broader shareholder group. But doing so is likely to take a lot longer than it would in a regular company because a direct approach frequently doesn’t work. Directors must learn to listen patiently and be empathetic about the family’s dynamics, egos, and fears.