The experience lived as an Advisor to family businesses brings interesting lessons, as there are unique characteristics in this type of organization. This article proposes to share part of these learnings.
According to the Code of Best Corporate Governance Practices 5th Edition – 2015 – IBGC – Brazilian Institute of Corporate Governance: “Corporate Governance is the system by which companies and other organizations are managed, monitored and encouraged, involving the relationships between partners, board of directors management, directors, inspection and control bodies and other interested parties ”.
Based on these definitions, the belief is that Corporate Governance adds value to companies, whether they are jointly controlled companies or family businesses.
Knowing how to listen and respect the company / family culture
When starting a job in a family business, it is essential to interview and listen with interest to what they have to say about the company and the family. And also to observe very carefully the culture that exists there, respecting it.
The mistake to be avoided is to try to impose something that worked in another company with a different culture within it, to come with pre-conceived visions and experiences. Any changes and contributions made by the Director should be based on this assumption.
Earning Family Trust
This is the most relevant item of all listed here. The Counselor will only be heard and respected when he has the confidence of the leaders of the entrepreneurial family.
This process starts from the previous item (knowing how to listen and respect the culture), being an achievement obtained during the first months of work. If it is not achieved, the chance of success and of adding value to work is greatly reduced
Do not align with anyone automatically
When the value of the Counselor begins to be perceived and the relationship of trust is in the construction stage, another process may begin to appear, which is the search by someone relevant in the family to make the Counselor “his man” and not someone independent, for example.
In many situations, this type of behavior is the result of the company and family culture and can create some “tight skirts” for the Director, who needs to leave these situations in an elegant way.
The action of the Director must be based on the interest of the company and not that of partner / family member A, B or C.
Permanent contact with executives and the Family
The performance of a Director is much broader than participation in the monthly Board meeting. He must be acting and interacting permanently with the main managers (directors) of the company and with the partners. Often these interactions and supports are more important than the formal decisions made at meetings. It is a time when the Counselor also adds value.
In family businesses, this is even more relevant, as managers have often not been used to sharing decisions or asking for help. It also helps to mitigate the “loneliness of power”.
Being available for videos, phone calls, lunches, is part of the role of a family business adviser.
Know the “Timing” of decisions
Relevant decisions in family businesses are articulated and built, except in the situation where there is a single owner who imposes his decisions but does not consult anyone.
The timing of decisions is essential. It shouldn’t be so fast that it looks like someone is being run over in the process, or so slow that it becomes something endless.
The Counselor collaborates effectively for the big decisions of a family business (strategy, succession, M & As, accountability, among others).
Seek balance between totally rational decisions and respect for partners / family members
In a family business, all decisions should not be expected to be 100% rational or equal to those made in a fully professionalized company (where they sometimes are not).
The Counselor oscillates between 2 roles:
Articulation: where there is a mediation aiming at a decision by consensus.
Very objective and rational position: when the situation demands it.
For example: situations involving family members, “trustworthy” directors, investments and the classic duality investing in business X distributing profits.
Key moments for change
There are several moments that end up being key to changes in a family business.
The first are situations of crisis in the company, whether caused by external factors (economic situation, pandemic), or by internal factors (conflicts, loss of focus).
The second is an illness or death of a key partner in the company.
Finally, when there is a decision to make a large investment or a radical turn in the direction of the company it also fits this reality.
All the situations listed above are moments when the Director, with his less emotional view, can play a fundamental role for the company.
Shareholders or family members in management: supporting and evaluating their performance
It is expected and desired that the Counselor supports a family member who is in management and who needs support in their professional development, or whose role in management is being questioned. With this support, he will be able to pave the way for his development as a manager or raise him to a level above the previously existing questions. He can also give the reasons for the Director to form his negative opinion about him and express (when requested), his opinion clearly.
This is a situation where a Director can add more value to a family business, because often, given the existing family relationships (father and son typically), the demands and expectations end up overlapping with an effective support for the development of the new generation.
Support the development of family members
As he is aware of the family dynamics of the company and its culture, the Counselor is sought formally or informally to support the development of family members, including those who are not working within the company.
So this is a “noble” role of the Counselor and very much in demand. Conversations, “Mentoring”, referral to conversations with other professionals in your networking are examples of this facet of action.
Relationship with the Family and the company
Remember that the Counselor of family businesses is not eternal within the company and that the rotation of people and experiences is beneficial for the company and the family.
Always act in accordance with your ethical principles, values and experiences. Never compromise on this point.
Use technical knowledge and jargon only when necessary.
Concluding this article, the final success will be given by the way in which the partners and the company will see, or not, value in the role of the Director and in the process of implementation and improvement of Corporate Governance.
The actions and attitudes listed here will greatly contribute to the success of a Director in a family business.
Author:
Daniel Blumenthal
Economist, Business Advisor, Executive.
Chairman of the Board of Directors of Petrobahia S.A.