Family Business Boards Crucial to Decision Making

Family Business Boards Crucial to Decision Making

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It is much easier to come up with the don’ts than the dos. When it comes to decision making process, it is far easier to identify bad practices than it is to develop good processes. In the past few articles I have suggested the perils of Groupthink a common family business paradigm, and offered two questions that help keep family firms focused on the ownership and management decision making processes (Is this business for sale? for owners and Whose decision is it and how will they decide? for management).

True or false: If it’s good for the family, then it’s good for the business, and vice versa? FALSE! I am sure you can think of many situations where decisions are made that favor one system over the other. There is a delicate balance between family and business in decision making. So, what processes can be installed to examine those decisions and offer the best outcomes?

The decision making process needs to offer objectivity. It needs to be fair. And it needs to be empowered. Above all, it needs to consistently offer good outcomes.

Families guilty of Groupthink can’t be truly objective. Autocratic decisions generally lack some fairness. And any decision without ownership consent is void of empowerment.

Maybe that’s why statutes require corporations to have boards! Boards offer a decision making process and structure that should offer the ability to improve decision making. That is, of course, if the board is a true board and not one of those rubber stamp deals…you know – the annual social dinner where nothing of importance is discussed and yet the CPA or corporate counsel manages to enter annual meeting minutes into the corporate minute book.

For the purpose of this article, we will discuss corporate governance. You can make the parallels to your business entity and structure.

If a true board is developed, and that board meets regularly, then decision making becomes more about how to decide – process. Good dialogue gaining pertinent data and debating differing points of view becomes a process to gain good decision making outcomes.

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