Thinking About Family Board Diversity?

Diversifying the board can be considered one of the most important strategies for family business survival and growth. A board of directors with independent, non-family members can have many benefits when it comes to strategic planning, succession, transitions, and managing the family dynamics and the family’s relationship to the business. Some of the benefits are:

  • Provides greater objectivity, different perspectives and the ability to ask questions, challenge thinking and provide opinions and insights to the family

  • Eases the difficulty of struggling through sensitive issues like succession planning, compensation and dividend policy – all issues that can divide a family

  • Ensures the needs of the family are fairly met AND the business and family remain unified and protected

  • Acts as mentors to the successor or next generation leadership group and introduce them to influential role models and business leaders

When independent directors are friends of the family, advisors or have had a long-term relationship with the family, it can be a detriment because they can be too ingrained in the family culture and can act more like insiders. “Insiders” and family members can participate in “group think” and may not be able to challenge a strong founder, CEO or family leader. Group think is a phenomenon that happens in teams and groups where the desire for harmony and confirming lead to flawed decision making. So everyone goes along with the strongest voice in the room even though their “gut” tells them otherwise.

Things to Consider When Diversifying Your Board

  • Look for someone who you don’t currently have access to for their expertise and advice. Don’t put your attorney on your board, you already pay them for their advice. Don’t put your fellow YPOer on your board since you meet once a month and have access to them already.

  • Find someone with business skills and unique experiences that will help you tackle current strategic challenges and those that are coming your way. If you are looking to make acquisitions, then look for someone with that experience. This allows you to reach across industries, find someone who has reached similar goals or had success overcoming similar issues.

Join us for a webinar on June 13th – we will discuss a related topic of board compensation.

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