According to law firm, Holland & Knight, family-owned businesses outperform private equity-owned firms, and both outperform public companies! Read article here.

A lot of my clients want to join family-owned business boards, and some want to learn more about them to decide if they should pursue them. Generally, family-owned businesses only have about 15-30% of their board as independents, the remaining being family members or other shareholders.

The question you must ask yourself: is a family-owned business board right for me? Pursuing the right board is step 1 of the process of getting board-ready and will enable you to align your board career plan more effectively.

Family-owned businesses face unique challenges that other businesses might not. If you have been a leader in a family-owned business or been part of the family, here are some common issues that you may be familiar with:

1. Succession Planning: Deciding who will take over the business when the current leadership retires or steps down. This can be difficult when there are multiple family members involved, each with different visions for the future.
2. Family Dynamics: Personal relationships can affect business decisions. Conflicts or favoritism may arise among family members, which can impact the company’s overall success and harmony in the boardroom.
3. Professionalization: Balancing family control with the need to bring in professional management. Family businesses often struggle to hire non-family executives or consultants, despite needing their expertise. I have also heard many stories of family-owned businesses not having great technology or systems to run the business.
4. Governance Issues: There may not be a formal governance structure, which can lead to unclear roles and responsibilities or disputes over decision-making.
5. Emotional Decision-Making: Family members might make decisions based on emotions or historic family values rather than business logic, which can harm long-term growth or profitability.
6. Balancing Tradition and Innovation: Family-owned businesses often pride themselves on tradition, but this can sometimes hinder innovation or the ability to adapt to changing market conditions.
7. Financing: They may face challenges in securing outside investment, particularly if the family is hesitant to give up equity or control.
8. Work-Life Balance: Family members often work together, leading to blurred lines between personal and professional life. This can result in stress or burnout if boundaries aren’t maintained. It can also make an independent director on the board feel like an outsider.

I have a lot of clients who have joined family-owned businesses over the years, and they enjoy the advantages of a strong sense of loyalty, long-term vision, a commitment to the community and, of course, the wealth-generating opportunity. It is also worth noting that all the family-owned business board members I have worked with and who have join boards, have had some experience in that environment – either having worked in a family business, or built one with their own family.

Being aware of these potential challenges is key to making an important decision about whether this type of board is right for you.