Benefits for a Family Business of a non-Executive Director experienced in Family Business

Over-riding principle

Experience, research and commonsense dictate that the non-executive director can only be effective in the following beneficial ways if he or she has no familial relationship to the existing directors and owners and also is not one of the existing professional service providers such as accountant or lawyer.

Benefits

The emphasis on each of these items would depend on the stage of development of the company. The most benefit would be in the Cousin Consortium stage.

1. There would be an objective to assist the performance of the business and the happiness of all those involved by maximising the use of experience, knowledge, training and independence.
2. Family relationship emotions are more reluctantly expressed with an outsider present.
3. Difficult established family relationships usually cannot be solved by the family because of the close family relationship, lack of experience and training in such matters. It is like trying to give oneself psychotherapy. This can be dealt with by an unrelated and skilled outsider.
4. The outsider will not take sides in an argument but remain independent.
5. Family directors sometimes have no experience outside their companies; this experience is introduced by an outsider.
6. Beneficial outside contacts can be introduced by the non-executive including skilled family business consultants.
7. The necessary family and business structures could be advised upon and introduced.
8. Agreed structures, relationship policies, business policies, meeting schedules etc. could be imposed.
9. Most banks would prefer an outside non executive director.
10. An independent voice can be applied to the matter of selection, appointment and training of family people.
11. Succession planning would be insisted upon.
12. Mentoring of family directors at the time of individual change for them
13. Family management roles in the business could be dealt with using agreed structures and procedures.
14. Relationships could be maintained to the extent agreed with non-employed family people.
15. Directors’ remuneration could be independently reviewed for fairness one to the other.
16. Day-today disputes could be independently resolved
17. Planning or helping to plan solutions when an existing business is reaching maturity.
18. Assistance with formulating business strategy and plans on a day-to-day, medium and long term basis in order to assure the survival and success of the business.
19. “Filling-in” and training for skills absent in the existing business structure to the extent required.
20. Monitoring cash flow and raising finance as required.

Copyright (c) 2006 Peter Thornton Associates. All rights reserved.

peter@thornton-asc.co.uk