In the recent Succeeding in a Changing World (PDF 1.46 MB) Family Business survey, it was revealed that nearly 80 percent of respondents are looking to bring non-family executives and non-executive directors into the business in order to retain their competitive edge.
As family businesses operate in increasingly challenging times, it is interesting to note that the family business sector is taking the professional approach. KPMG member firms have seen an increasing desire within family businesses to professionalise operations by bringing in non-family members to help manage and advise the business in a more commercial way.
Independent board executives and non-executive directors can help to manage the transition process as the business succeeds to the next generation, as well as address complex issues surrounding the intersection of family and business, which is instrumental in the longevity of the business and ensuring that there is something of the business left to pass on to the next generation.
It’s an important shift in the way that family businesses operate, recognising that they can own the capital and net the dividends, as well as play a key role in deciding the strategy of their business, but at the same time bring in professionals with commercial experience and knowledge to execute the day-to-day running of the business.
One of the difficulties of being part of a family business is the separation between family and business interests, which leads to conflict and ineffective decision-making. Non-family executives and non-executive directors can help reinstate objectivity and professionalism into the decision-making process, acting as an impartial sounding board and advisor, with wisdom gained from outside experience.
Family businesses do need outside expertise in various areas of the business in order to survive and thrive beyond the limits of what internal expertise alone could achieve. It’s important though that family members have a clear vision of their expectations for the business and the directions that it needs to take, which they can share with the professional management that have been brought into the family business.
As family businesses look outside for specific commercial skills that are required to move their businesses forward, they are balancing their own knowledge and experience with proven business acumen and expertise.
The family business’ competitiveness, its ability to survive and grow, will depend on the strategy and organisational capabilities of both the family and resources hired from outside. As a result, there should be increased accountability, both internally to a Board of Directors, and external non-family members who can be brought in to share new and different skill sets, experiences, perspectives and ideas.
When there are different shareholders involved, the introduction of corporate governance disciplines can be a huge commercial advantage. As such, there are a number of family businesses which benefit from the wisdom and counsel of external directors in helping develop their business, without seeing the presence of independently minded individuals as a disadvantage.
In fact, separating family and business into a Board of Directors meeting and a Family Council meeting will allow the business to focus on issues that affect the business, and the family to focus on issues that intersect both.
The greater the number of commercial minds on the Board of Directors and/or Board of Advisors will lead to a greater likelihood of better decisions being taken and better business performance. In order for family enterprises to play to their strengths in the global competitive arena, the successful businesses will find they have to adopt an even more professional approach going forward.
Download the full Succeeding in a Changing World (PDF 1.46 MB) report.