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8 Ideas To Strengthen Your Family-Owned Business
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Article 5: Form A Board To Mediate Family Squabbles
Sons and daughters and parents and in-laws bring more than business skills to a family firm. They also bring personal relationships, and that can sometimes spell conflict.
Establishing a board of directors can help steer the business when family members disagree on the direction or management of a family firm. Boards can help choose successors, determine executive compensation and guide growth decisions.
And the longer the company stays in family hands, the more helpful a board can be. As families grow through marriages, more members show interest in being part of the business. Power struggles and squabbles can erupt as each family vies for more representation in the firm. A board of directors can set policies that will help head off the conflicts.
To establish a board, first set criteria for a membership. Members should be selected for their expertise, not their personalities or standing in the family. You want members who can take the long view of the company, who can contribute to setting policies and company direction.
The purpose of the board is to bring additional insights and capabilities to the business. That means family members who are also managers don’t get an automatic seat on the board. In fact, it’s helpful to bring in family members who aren’t involved in the day-to-day operations.
Don’t use board positions as a training ground for the next generation. Young family members should be trained in the day-to-day operations and management of the company. It’s that foundation that will someday help them take the larger view of the business and participate in company governance.
Establish term limits or provide for member rotation on the board. That not only promotes fairness, but it also increases the knowledge and experience base of your board.
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