At the start of each input lecture of the “Award in Leading a Family Business” accredited course, I remind participants that the family businesses that succeed in the long term are those keen on learning, looking for new ideas and asking the right questions, those that stick together no matter what and those that are open to change. In principle everyone agrees to these elements. During yesterday’s input lecture I delved in detail in corporate governance structures and the value that independent non-executive directors can bring to family businesses. I could however sense the resistance of some of the participants to this. Many seemed doubtful that independent advisors or independent directors can really help the family business as they would not know “how we work”, thinking that it is the independent advisor or director that has to change to their way of thinking, than vice versa. This is when things start getting harder.

Let us start with the basic principle that having a functional and competent board of directors is essential to the success of any family business. However as we know, the board does not only have the role of oversight and control, but should also be actively involved in the value creation of the business and driving strategic innovation. It can be thus a family business’s competitive advantage if board members can provide an outside view, overcome blind spots in the strategy, raise awareness of external risks, connect with important stakeholders, give credibility and build trust in ways that family executive teams cannot. To achieve this, board diversity is key. Board members from different industries and backgrounds will enable the board to foresee disruptive industry shifts, external risks and opportunities, more quickly. This diversity, combined with the enormous personal commitment and dedication of its members, is what makes a good board. Thus, non-family independent advisors and board members can greatly add to a family business board’s diversity. Family business boards are often composed solely of family members in order to retain family control, but this does not favour external voices and therefore increases the risk of strategic myopia. Bringing non-family members onto the board can protect family businesses from “family group-thinking” and thus improve objectivity and rational decision making.

Moreover, if a family business is gripped by an anti-openness culture, it will effect its longer term business success. History is full of strong family businesses that perished as they failed to keep up with external change. Most long-standing family businesses are well-established incumbents. However, if they do not want to perish, they cannot afford to ignore potential industry game changers. Instead they need to keep their eyes and ears open and adapt to the industry as closely as possible because disruptive innovation can potentially destroy the competitive advantage of established players. Thus it is crucial for family businesses to be open to external information and change because they naturally tend to be discreet and conservative, and therefore perhaps less reactive to changing trends around them.

Isn’t it ironic that as family businesses close themselves up thinking that this is the best way to protect what is most precious to them, this leads them to sticking to an established identity and routines, which can make them more hesitant to look around them and less willing to for external advice, which in turn leads many family businesses to fall behind, if not perish? No wonder research after research outlines that the openness of top decision makers in family business is essential to leverage the advantages of family businesses and avoid common pitfalls.

Registrations for the 2nd Cohort for the “Award in Family Business” accredited course are now open. Please click HERE to Register. We will also help you gain funding for this course. This course will help your family business be fully prepared to face present and future challenges.