In our on-going conversation about better business practices, DTN Farm Family Business Adviser Lance Woodbury and I delve into how to build and staff a board of directors. Seeking outside advisers is a practice that's mushroomed in other professional family businesses over the last 10-20 years, especially as the volume of sales and scale of responsibility has grown.
Woodbury trained as a professional mediator and has coached family businesses for more than 20 years. He is an instructor at TEPAP, the Executive Program for Agricultural Producers, Texas A&M's elite mid-career management school, and writes monthly columns for DTN and our sister publication, The Progressive Farmer magazine. He is a principal in Ag Progress and is based in Garden City, Kansas:
Taylor, DTN: Lance, you’ve recently written a couple of articles on advisory boards, one focused on the nuts and bolts of advisory boards and another in which you address different kinds of people who might serve on an advisory board. What are some of the issues that advisory boards tend to tackle?
Woodbury, Ag Progress: Marcia, there are many opportunities for outside perspectives in a family business. One key discussion point in an advisory board meeting is the owner’s future business strategy. What is the plan for winning in business? How will the business operate at an above-average level? For a business owner, having to explain, defend and improve upon that business strategy can be a significant benefit.
Beyond business strategy, an advisory board can offer feedback on key roles and responsibilities, financial projections and balance sheet structure, compensation and bonus strategies, talent acquisition, business processes, family dynamics in the business, entity structure, financing strategies, key customer, vendor or landowner initiatives and public relations. The list is really quite long when you think of all the strategic issues that affect a closely-held company.
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Taylor, DTN: Are there concerns or missteps you’ve seen when forming an advisory board?
Woodbury, Ag Progress: One issue I’ve seen is that the business owner might not truly be ready to listen to what the advisory board has to say, and so their implementation of recommendations and advice is lacking. In some cases, the advisory board was founded for the wrong reasons; it was more about the show and stature of people attending, and less about the substance of the discussion.
Another issue is not having some of the family members at the table who would benefit from hearing the advisory board discussion.
While keeping the room balanced between business participants and advisory board members is important, the chance for family members to become acquainted with other successful business owners is a real opportunity for maturation.
Finally, some people see their accountant or lender on their advisory board. While I certainly think those professionals should attend the meetings, I tend to reserve true advisory board membership for those who have more independence from the business owner, as they may be more likely to state their true feelings and opinions.
Taylor, DTN: How do you keep the advisory board from growing stale?
Woodbury, Ag Progress: Marcia, I encourage people to set up a rotation of advisory board members. For example, if three board members have staggered three year terms, there is someone new coming on every year and that keeps the discussion and analysis fresh.
Taylor, DTN: Any other advice?
Woodbury, Ag Progress: In my observations, one of the underutilized aspects of advisory board members is their networks. Each advisory board member brings a multitude of relationships along with them, and some of those relationships could be helpful to the business owner. If you set up your advisory board with the expectation that members are encouraged to share their relationships, it can dramatically multiply the connections to the host business.
Taylor, DTN: Thanks Lance. Subscribers can see your most recent column on the Farm Business page and access all of your past articles in news search. But if anyone has a question or comment on this column, fire away.
Follow Marcia Taylor on Twitter @MarciaZTaylor
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