The family is at the heart of any family-owned business, but increasingly more family businesses are recognising the need to bring in outside expertise and talent at senior levels, and they understand the importance of checks and balances that independent, non-family members can provide to their company.
According to our Family Business Global Survey, only 10% of family firms have boards constituted entirely of family members. Family businesses around the world are clearly seeking out external expertise and knowledge.
Our survey revealed that in larger companies the board is more likely to have a higher number of independent members. This makes sense from a numbers point of view – the family only has so many members – but it also reflects the wisdom of obtaining more outside talent as the needs of the business expand in accordance with its growth.
One South African family-member CEO who served as a respondent said: “We will welcome new board members to share inputs and drive business decisions based on their knowledge and perception.” The board of directors plays a vital balancing role in many businesses, with 52% of companies saying that less than half or none of the board is made up of family members.
While access to more funding is the most significant reason for family businesses to offer equity in their companies, they are also attracted by the additional expertise an outside investor can bring. In fact, the survey revealed that 57% of family firms are prepared for investors to offer their advice and expertise.
This suggests that, although family businesses are keen to maintain control, they also recognise that outside experience and knowledge can bring significant benefits to their company. This is reflected in the fact that just 13% of respondents say they would want outside investors to be completely passive. By contrast, 30% say that they would be prepared for investors to take a board seat, suggesting they value the strategic input an outside investor could bring.