Objective overseers: Avoid cronyism when selecting board members

Family Business

The family business frequently has multiple shareholders who are family members, but oftentimes the board is also made up of family outsiders. As the saying goes, “you can’t pick your family,” but you can pick the outside board members wisely by selecting on competency and character.

One of the most common mistakes owners make is cronyism – choosing someone because she is a friend. This may have served well during the 1950s, but today’s boards are far more complex – and should be – because the issues they will face are complicated. A board member who is too close to the family can’t offer objective concerns the way he needs to, or ask the right questions when they need to be asked. If the chair/owner wants a golf foursome, go golfing, but if you want to run a board and keep your business going, choose individuals with skillsets, expertise, and enough distance to remain objective.

A good board member is there to support and offer sage advice. Recently, the owner of a board I sit on called a meeting with me to discuss our roles – his as owner and mine as board chair. I made it clear I am not there to run the business – manage it – that is his job. But I am there to protect the business, and my loyalty is to the organization he built, first and foremost, even above him!

That was tough for him to hear, but it is the truth. That is how I view “fiduciary,” although I am sure some lawyers reading this will have a far more lengthy opinion. The board member must protect and serve the organization, and sadly, sometimes that protection must even be rendered against the owner, who sometimes makes capricious decisions. Is that new product line really in the best interest of the firm or the ego of the owner? You need to speak up if you have concerns.  This type of board member is what a family business – any business – should want.

So what kind of board member should be hired? Stay away from people that could be paid for their services, like bankers and lawyers. You can secure their services in other ways without having them on a board. Diversity of opinion is a good thing, and this can come from ethnicity or gender. Add people who understand the industry without being in it, and most of all, hire people who have the wisdom of Job and the counsel of Solomon. A person with integrity. A person with honor. These people are not easy to find, but you know them when you meet them.

The owner who hires friends will get yes-men most frequently or ex-friends when the fire is lit for some reason. Don’t risk friendships or worse, your business, by selecting people with strained objectivity. Choosing the right person helps ensure a legacy of future success for the business and this makes sure everyone is on board.

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Dr. Borst is the retired Dean of Business at Concordia University. He started up five businesses under borstthebrand.com and is COO of the Family Business Legacy Institute. He can be heard every Saturday morning as Dr. Dave at 6:20am on WTMJ radio with the FBLI show- "All Business". Dr. Borst is an entrepreneur, author, speaker, and blogger of a variety of topics from religion to politics or any of the topics you are not supposed to discuss.

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