Family-owned or family-led enterprises are the backbone of thriving economies across the world. They account for the majority of companies, providing 70% of the global GDP and 60% of global employment. The long-term success of family-owned enterprises across multiple generations is neither a given nor an easy task. There are many complexities involved when ownership, management, and family roles overlap.
In this podcast, Dr Sabine Dembkowski Founder and Managing Partner of Better Boards discusses the role of boards in family-owned enterprises with Martin Roll. Martin is a senior advisor to Fortune 100, Asian, and global family businesses/offices. He has more than 25 years of board & C-suite counseling experience and is a mentor for next-generation leaders in family-owned enterprises.
“The boards of family-owned or family-led business receive less attention"
Martin opens by explaining the differences between family-owned and listed organisations. In a family-owned enterprise, a board may comprise family members with independent directors, or only family members. Also, family board directors may also be owners and/or leaders in the company.
“Who really has the power on the board…”
Martin believes the board put together for a family-owned business is going to mirror global markets in those intricacies that relate to that particular family. So flexibility is needed, and this is possible because family-owned enterprises are not bound by the same SEC rules and monetary authority rules (unless partly listed). He recommends ensuring more informed reporting lines (or many complex reporting lines), to intertwine ownership, family members, and management.
“In family-owned enterprises, there is this underlying notion of a very long-term view”
Martin believes there are four things he has seen working in family-owned enterprises that larger organisations could learn from. 1. Importance of the long-term view and the fact that family businesses tend to think in generations. 2. The proximity to owners and shareholders means relationships can become a little less informal. 3. Family-owned enterprises are very driven by purpose, values, ethics, and legacy. 4. Martin believes that family firms are a force for good in the world, because a family enterprise often comes from a certain region, town, city, and/or culture, and they often want to give back to that community.
“If you are making space for outsiders, you also need to give them that space”
Martin finishes by looking at the challenges for boards in family-owned enterprises, and the difference between family and non-family directors. He notes that external directors need to understand the history of the enterprise, as the culture of a family firm is a combination of past, present, and future, and that culture must be respected.
The three top takeaways from our conversation are:
1. Governance matters for family-owned enterprises are often underestimated. They need to start early to adapt and learn, and then seek governance as a journey and not an end state, to add new skills, get an outside perspective, freshen up, and innovate, while still keeping checks and balances.
2. Family business boards can be more complex to manage. The oversight is different and takes extra attention and skill, but can also be a very rewarding journey.
3. Learn from family firms, because they have a long-term view, and are more patient but still highly competitive. Learn from the best practices in corporate governance, but also be willing to create your own model because all family-owned enterprises are different.