Starting a Board for a Multigenerational Family Business
To build a board that will help both the company and the multigenerational family members start small:
Often when a private company is successful beyond the founder and the children are also involved in the business it is time to consider putting together a board for the business. The board will help insure the life of the company beyond the founder’s tenure and possibly to the 3rd and 4th generation with minimal family tussles and angst.
The challenge of a multigenerational business is the family tree effect. It starts with a single family member (or more challenging several family members start the business). The founder(s) have children and the 2nd generation has children and next thing you know the genetic ownership reaches into the teens of people. If family members continue to be in the business then who is qualified to run the business, it is often not the oldest as I have observed in many situations.
Tensions usually arise around fairness and different life plans for those follow on generations.
To build a board that will help both the company and the multigenerational family members start small and walk before you run. Start with a small 5 person board. On the board I would suggest that there be:
- The founder
- A second generation owner that is in the business if possible. This person need to have the support of their siblings/cousins to be focused on the best interests of the company and its future.
- A company insider that is trusted by the founder and the second generation. This is often the company President or CFO, COO, etc.
- Two additional outside board members that have no ties to the company or the family. At least one of these board members should have experience in multigenerational family businesses. Both board members should bring experience working on boards and in your industry or business challenges.
By building a solid operating board all parties benefit from the focus on adding strategic value to the company and an objective view of the company issues and multigenerational ownership.