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					      Family Business Tools:

  Family Meetings, Advisory
Boards and Boards of Directors

         Presented by
   Work Volf Consultants, LLC

        College of Charleston
       Room 301 Beatty Center
                   You’re not in this alone:
             Family Owned Businesses in America

1.    About 90% of all U.S. businesses are family
      owned or controlled.
2.    Sizes range from the traditional small
      business to a third of the Fortune 500 firms.
3.    They generate an estimated half of the
      country’s Gross National Product and half of
      the total wages paid.
4.    Less than 1/3 survive the transition from 1st
      to 2nd generation ownership. Of those that
      do, about 1/2 do not survive the transition
      from 2nd to 3rd generation ownership.
Source: Small Business Administration; Nancy Bowman-Upton (1991)

                                          Product of Work Volf Consultants
         Common Family Business Issues,

•Who will participate in the business
• How leadership and ownership will be transferred
• How to help the founder change roles or leave the business
• About liquidity and estate taxes
• If and how to attract and retain non-family executives
• About family compensation – equity (genes) or merit
• How to choose successors
• How to strengthen family/shareholder harmony
Source: Small Business Administration; Nancy Bowman-Upton (1991)

                                  Product of Work Volf Consultants
    Communications, conflict resolution
    and decision making require TOOLS

   Formalized structures
   Agreement about how to do these actions
   A safe environment in which to conduct
    the business (often requires a neutral
   Separation between business and family
   And what else?

               Product of Work Volf Consultants
       Hold FORMAL family meetings for business:
              How do they work?                   (See Handouts 1 and 2)

   Who’s in charge?
   How are decisions made?
   What’s on the agenda?
   Who should attend?
   Is the subject matter BIG? What
    about a retreat?
   What are the rules? Be on time, be
    prepared and listen.
   What happened? What decisions
    were made?
   What’s next?

                           Product of Work Volf Consultants
Consider having an outside board; why?

            Help to clarify the issues to be studied
            Provide an objective analysis of alternative scenarios
            Help refine future strategy
             Helps diffuse the situation and point in the right
            May have already had a similar experience in decision
            Helps the family get past gut feelings and emotional
             judgments to design a process to systematically weigh
             alternatives and study ramifications
            Helps keep the family focused and define boundaries
             between family and business.
            Provide unbiased views, force accountability and
             establish networks of contacts.
            Provide new standards of performance
        Source: Sustaining the family Business by Paisner
                   Product of Work Volf Consultants
                   A great Board of Directors
                      brings great results!

1.   Provide continuity for the organization by setting up a corporation or
     legal existence, and to represent the organization's point of view through
     interpretation of its products and services, and advocacy for them
2.   Select and appoint a chief executive to whom responsibility for the
     administration of the organization is delegated
3.   Govern the organization by broad policies and objectives, formulated
     and agreed upon by the chief executive and employees, including to assign
     priorities and ensure the organization's capacity to carry out programs by
     continually reviewing its work
4.   Acquire sufficient resources for the organization's operations and to
     finance the products and services adequately
5.   Account to the public for the products and services of the
     organization and expenditures of its funds.

                               Product of Work Volf Consultants
            Boards in
    Family Owned Businesses

• More than 1/2 of the respondents describe
their boards as strong and positive
component of their company.
• More than 1/3 (36%) rate the contribution as “good,” and
22% recognize board performance as “outstanding.”
• But a substantial percentage of respondents report weak
board performance. Fifteen percent regard board
contribution as “fair,” and 2% rate the board’s contribution
as, “poor.” Twenty five percent cite “no contribution.”
Source: American Family Business Survey by Massmutual Financial Group/Raymond Group (2003)

                              Product of Work Volf Consultants
      Another Type of Board: Advisory Boards

   A Board of Directors is legally constituted and has
   voting and decision-making powers.

   An Advisory Board is not governed by legal statute
   and can operate pretty much however you need or
   want it to.

   Think of it as being like an organized group of
Source: Sustaining the family Business by Paisner

                                  Product of Work Volf Consultants
                        Count the ways:
                 The benefits of Advisory Boards
                                         (See Handout 3)

• High powered talent and expertise not available in
• Data based, objective evaluation of needs, talents and
• Assistance with tough decisions about business and
• Strengthening of business planning process
• Objective problem solving
• Guidance for enhanced, innovative strategy
• Objective assessment of family members and key non-
family personnel performance

                                    Product of Work Volf Consultants
               Forming the Advisory Board:
                                  The “how to”

• Duties. Incorporate into job descriptions.
•Leadership. With smaller family businesses, the CEO. Over time and with
increasing size, an advisory board can develop its own leader.
• Size. Whatever you need to get the job done.
• Authority. Advisor needs authority consistent with duties.
• Relationship with employees. Defined by job description.
• Meetings. Frequency and formality delineated by advisory board and
organization’s needs.
• Compensation. Costs to attend meetings and promote the business
should obviously be reimbursed. As for pay, probably the best guideline is
that "you get what you pay for.“

                                   Product of Work Volf Consultants
How can you make the most of these tools?
             It’s your turn!

               • Formal Family Business
                     • Board of Directors
                        • Advisory Board

             Product of Work Volf Consultants

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