The Advisory Board: A Powerful Tool for Business Succession

When it comes to business succession, the creation of an Advisory Board is a strategy that can produce many benefits for a family business engaged in determining the future.

In general, family businesses utilizing an Advisory Board as part of their succession management process tend to thrive in size and profitability. And, not surprisingly, they also are inclined to have healthy family relationships and successfully transition from one generation of family ownership to the next.

For most family businesses interested in implementing the Advisory Board strategy, the time required to prepare for an initial meeting will range from 6-24 months; this point cannot be underscored enough as it will take that amount of time to conduct the due diligence required to effectively utilize this vital consultative panel.

Many architects and civil engineers will tell you the key to a successful construction project is mostly about site preparation work; the same concept applies to getting the family business ready to support the activities of their Advisory Board.

The members of an Advisory Board are not family business consultants. An Advisory Board may consist of one or several objective and experienced business people who are unrelated to the business at hand. Impartiality is pivotal to the composition of an Advisory Board as an “outsider” can bring perspective to both the issues and opportunities that face the family business.

It should be noted that Advisory Board members are not trained or experienced in dealing with family business dynamics. Those difficult family issues must be recognized and resolved before the Advisory Board can go to work. If these concerns are not dealt with honestly and thoroughly beforehand, the succession management process will be stalled…and at times completely derailed.

A professional succession management program facilitated by a qualified financial consultant can help guide the Advisory Board process. As an example, the approach taken by Northeast VisionLink includes a structured, yet informal meeting for frank conversation about the history of the family business, its present situation and anticipated future – with the goal of opening the lines of communication to allow the family to think about working together as a cohesive group. Individuals may have varying personal goals, but with the guidance of a qualified consultant, the shared common objectives for the business as a whole will become more visible.

One-on-one interviews with all family members involved in the business as well as key non-family members of the management team is part of the due diligence conducted by a financial consultant; these sessions provide individuals the opportunity to discuss their personal goals and aspirations as well as their ideas and concerns about the family legacy, all in a confidential manner. The interviews serve as the foundation for a recommended course of action or strategic plan by an Advisory Board.

It should not be forgotten that an Advisory Board has a business orientation; that is to make the business more successful. The needs and goals of the family drive the strategic objectives for the business and, from a succession management perspective, gives the Advisory Board a framework to build upon.

The next step is putting together a "to do" list for the family and for the business - and getting agreement on a time frame for completion. At this point, participants are in fact helping the family business create the infrastructure needed to grow the business for both the present and the future. This is also the time period when a financial consultant can begin to determine the composition of people that could be recruited for the Advisory Board.

Part of the challenge of a financial consultant is to ensure the correct personal chemistry between the family and board members. It is extremely important that they share common values. Likewise, confidentiality is always an important element of the recruiting process. A financial consultant can meet and talk to potential board members as a representative of the family without divulging the identity of the family business.

It must be noted, however that once an Advisory Board is in place it will be privy to sensitive infrastructure materials, including a formal business plan, a written succession plan, and Buy/Sell Agreements.

An Advisory Board can be a powerful tool for growing a business and maintaining healthy family relationships. Most importantly, it can create a safety net for the family and the business in the event of a catastrophic occurrence, such as the unexpected death of the business owner.

Next month we’ll get into specifics regarding the composition of an Advisory Board, its intrinsic benefits and suggested compensation for participants.



About our Benefits Installment Author: James E. (Jim) Moniz, CEO of Northeast VisionLink, a Massachusetts firm that specializes in structuring executive compensation. James E. Moniz is a national speaker on the topic of wealth management and on executive compensation. Jim Moniz will be presenting at this years SHRM conference in Phoenx, be sure to check out our presentation: “Creating and Sustaining a Competitive Advantage, The Role and Impact of Effective Compensation and Rewards Strategies”

10 Reasons Your Employees Hate You (Or at least reject you)

Here's a fun (though serious) list to ponder.

Being the boss comes with some great perks- a better bank account, corporate benefits, and a fancier title- but why, before you even hold your first meeting, do you get the sense your employees hate you? Unfortunately, more power comes with more problems, and Neil Giarratana, author of "CEO Priorities" and former CEO himself, offers 10 reasons your employees hate you before you even settle into your office:

1)Someone else had aspirations for your job, didn't get it, and concluded that the selection process had serious flaws.

2)Blame MUST fall on someone, and, because you're the biggest beneficiary of the company, you are the biggest target.

3)Your style of leadership or rumored future plans could be the problem. Even if you made NO indication of any future plans, rest assured the rumor mill is alive and well.

4)Someone in the company knows you from another company situation or from within the company, and got to know you during your climb up the ladder. His 'memories' of you are more like nightmares. He might have even worked for you at a previous company.

5) There are concerns you will bring in a new team and replace current management, which could involve new hires or people from your old company.

6)Your real or rumored lifestyle may offend certain people in the company.

7)You seem so different from their beloved previous leader that you can't be any good.

8)You come from another industry and don't understand what "our industry" and "our culture" are all about.

9)No one really knows what you're going to do, how you're going to act, or what policies you will follow, but everyone knows that in spite of that, it will be and has to be stopped.

10)You may already know an executive in the company and you may not think very highly of him. In all probability, he will know this, too, and be part of an 'undercurrent' problem you experience with him because he will be concerned that you will readily replace him.

In his book, CEO PRIORITIES (Career Press), retired international CEO, Neil Giarratana, shares "conduct and survival related" insights and recommendations aimed at providing future and current CEOs with the means to be on the positive side of that "popular opinion" equation and thereby reduce or eliminate the disdain factor so omnipresent in today's discussion of business leadership.

Fear at 360 Degrees…

To unlock the power of the 360 degree feedback process a manager must either be well prepared to navigate through gap analysis and a host of comparative data or should be flanked by a coach throughout the debriefing period.

It is easy for a manager who feels untrained when it comes to giving feedback to fall into some of the common traps that have given the 360 degree feedback a bad reputation in the past.  Feedback that mentions “who said what” or focuses solely on the weaknesses of an employee without being careful to offer a balanced feedback may do more harm than good and be easily overwhelmed by the quantitative measurements. If the desired result of a 360 degree feedback process is to improve the behavior of employees or leaders, then it is vital that the feedback be as accurate, balanced and relevant as possible.

While all this sounds like common sense, are you able to distill the meaning of the results of a 360 degree feedback in a professional and constructive manner? Or do you find it to be a personal affair?

Questions to ponder:

• Have you ever struggled with giving a balanced feedback?
• Do you have an anecdotal vignette to share?

Suggestions:

• Partnering with coaches can provide long term benefits in the professional development of your employees, leaders and ultimately your organization.
• Using 360 Degree Feedback tools that have been custom build for your organization can make all the difference.

The reshaping of feminine leadership in a mixed gender environment

Continuing on the theme dedicated to Team Building, team Effectiveness and GroupThink we are highlighting a thought-provoking research conducted by the Bristol Business School at the University of West England that focused on the different leadership roles of men and women within teams. Specifically, the research question was ‘To what extent is leadership as a sense-making process impacted by gender? Using a pragmatic approach involving the use of induction, discovery of patterns, deduction and testing of theories and hypotheses, Grisoni and Beeby compared the interactions and results of teams comprised either by men alone, women alone or mixed genders.

The research indicated that the essential conservatism originally associated with male professionals permeated all three teams indicating that men and women adopted teamworking strategies for sense-making that contained many similarities. The authors used “meetings” as part of their study because the modern business trend is to utilize team-based leadership that involves more meetings with increasingly growing numbers of women in senior positions.

The essence of the study can be distilled to the following: 
The gendered nature of meetings could be a barrier to the expression of feminine forms of leadership which typically entail ‘managing’, ‘facilitating’, and ‘influencing’ and would instead shape their leadership toward a more mixed gender scheme of ‘developing’, ‘nurturing’ and ‘managing’ attributes.

Questions to ponder:

• Have you experienced a difference in single gender meetings vs. mixed gender meetings? 
• Do you find that feminine leadership is reshaped by the mixed gender business environment?
• How is male leadership affected by the increased number of senior female leaders? 
• Are the male professionals morphing their leadership styles as well? 
• Is this a desirable outcome for the teams in your organization?

Grisoni, Louise, and Mick Beeby. "Leadership, Gender and Sense-making." Gender, Work & Organization 14.3 (2007): 191-209.

Ability diversity or cognitive diversity: what yields the most accurate decision-making group?

According to a study published on the Information Science Journal, it was proven through unique empirical research that while ability diversity decreased group decision errors by approximately 4%, cognitive diversity was much more effective as team decision errors were reduced by approximately 13% thus putting into question the popular belief that reliance on using more capable members to create high performance homogeneous groups may lead to better team decisions. The final conclusion of the study was that a much better strategy is to create groups of members that ‘think differently’ and cooperate to produce a group decision

So, group composition really improves decision making? Certainly. Yet, the traditional approaches should be augmented. At a software tech firm, for example, forming coding teams that produce error free, innovative work would require more than just the lumping together of the brightest programmers and then setting them on a problem. It takes more diversity than that.

A good first step for our software firm would be to compose the group from, say, two bright computer programmers, two physicists, and two mathematicians. This would give you a group formed from members with diverse abilities. Yet, according to the new research, this would only reduce the team’s decision errors by about 4% because their cognitive abilities are still so similar.

What is needed is not only diversity of skills and high intelligence, but also diversity of thinking style. The most difficult trick of all turns out to be in identifying thinking styles. A good second step comes from the research of Professor Thomas Malone of MIT. Putting a few women on the team would improve the overall social sensitivity of the team thereby increasing its collective intelligence.

Questions to ponder:

• Is your organization postured to make savvy team decisions or is their effectiveness limited by lack of diversity (ability and cognitive)? 
• How does the composition of group membership differ between most accurate and least accurate decision-making groups? 
• Can you even identify your most and least accurate groups?

Here is an interesting and related video:

If you are struggling to find ways to identify thinking styles, one way is to examine management decisions.


The research article cited above: West, David, and Scott, Dellana. "Diversity of Ability and Cognitive Style for Group Decision Processes." Information Sciences 179 (2009): 542-58.33