Working with our family business clients, we have seen some businesses misunderstand the purpose of, or underutilise, the director appointed as Chair, and therefore miss the opportunities, skills and perspectives this role can bring.
Appointing a Chair
A family business will typically appoint a family member as Chair based on, for instance:
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- The age or generation of the person. This can often be the founder or elder member of the incumbent gen.
- The longevity of management experience in the business.
- The ‘rubber stamp option’ – ie someone who is acceptable to the whole family and will not rock the boat.
There are many advantages for a family business if they consider casting the net further and moving outside these typical parameters when electing a Chair.
This can include recruiting a Chair from outside the family, or selecting the best option from the rising generation rather than an incumbent.
Appointing outside the family – the advantages
When it comes to an independent non-family Chair, it can be easier for this ‘outside’ person to assist in cases where a family struggles with boundaries between the family and the business. This can be a hurdle for some to work through, especially where the ‘right’ to be Chair may have been bestowed rather than earned. Therefore, ensure the process is clearly communicated and transparent.
In many family companies, the Chair’s main role is administrative, ie to make sure board meetings are diarised and agenda prepared. But the role can add a lot more value, and this ‘outside’ Chair can offer a new or different perspective to issues, and bring new skillsets and experience to the role.
Here are some specialist responsibilities an external Chair or an internal appointment with professional development can bring to a family board.
Leading the development of collective views: While a board of directors comprises individuals who may have their own respective views on a range of strategic issues, they have a fiduciary duty to act as a single ‘conscience’ in the best interests of the company as a whole. Many boards struggle with this aspect and it is Chair’s job to ensure that a collective view is developed on all key strategic issues, while giving all directors the opportunity to express their opinions appropriately.
Harnessing the talents of directors: Not unlike a football coach, the Chair’s role is to ensure the individual talents of the board are employed to achieve the best outcome for the company as a whole. This requires the Chair to make an effort to understand the strengths and weaknesses of individual directors.
Mentoring/coaching: A good Chair will be active in providing a sounding board for other directors, and to ensure directors have an opportunity to develop their skills so that they can best serve the company.
Shaping and upholding your company’s culture: A company’s board is the owner of the organisation’s culture. From being the North Star for culture – creating an inclusive and diverse workplace, for instance – to the other end where dysfunction and toxic behaviour trickles-down across the business, a board can have a direct impact on the values, behaviours and focuses of an organisation. The role of the Chair can help steer a business’s culture and take a leading role in ensuring the board is the custodian of the culture, and that decision-making occurs with that culture in mind.
Working with clients
A qualified and experienced Chair who understands these responsibilities can go a long way to creating an effective family company board that will serve the best interests of the company, its family owners and associated stakeholders. Get in touch to discuss your family board or if you need help in developing a role description for this key family business role.
Family Business Survey 2021
