Larry Molinari has this to say about family-owned Perlick Corp.’s board of advisors: “I wish we would have started it much sooner.”
Molinari is chairman of the board and former co-chief executive officer of the 102-year-old, Milwaukee-based manufacturer of commercial bar and beverage systems, residential undercounter refrigeration and brewery fittings.
The company has an advisory board that consists of four family members and three independent, non-family members. The four family members vote on any motions brought before the board but receive guidance and insight from the others.
Companies like Perlick that opt to have a formal board of advisors are likely in the minority, according to experts.
David Borst, retired dean of business at Concordia University and chief operating officer of the Family Business Legacy Institute, estimates less than half of family businesses choose to have a board.
“A board of advisors is a rarity,” he said.
Rand McNally, principal at Mequon-based consultant McNally Ltd., said, based on research his firm did a couple years ago, roughly one-third of private companies have boards that function adequately, another third have boards that do not function, and the remaining third don’t have a board at all. He cautioned that the research was not statistically valid but likely “better than anything else that is out there.”
McNally’s firm helps private, family-held companies search for board members and evaluate existing boards.
Borst said the need for outside opinions is clear in many family businesses, as outsiders aren’t worried about pleasing the boss.
“There is a tremendous amount of homogeneity when you’re dealing with only your family,” Borst said. “You need the perspective of others.”
He said one option is to simply hire someone to provide the specific guidance a company is seeking.
“If you need to have an outside perspective of an attorney, accountant or financial advisor, you hire them and they advise you professionally,” Borst said.
When filling seats on actual boards, Molinari said family-run companies should seek out experts who also understand the intricacies of a family business, as they operate very differently than those that are publicly owned.
“When you look for board members, you want people in a family business,” he said. “You also want skills that the CEO and chairman need in evaluating their business, and not only evaluating, but ideas to move forward and grow the business.”
He pointed out his father-in-law and third-generation owner, Robert Perlick, did not have a board of advisors. Later, around the time Molinari and co-CEO Steve Bergum were looking to retire, they established a board that consisted of themselves plus some consultants.
One of the consultants eventually suggested it would be better if they looked for more independent voices to serve on the board. Once Perlick hired a new CEO, they leaned on him to suggest prospective board members.
However, that didn’t work out for the best. Learning from Perlick’s mistakes, Molinari said it would have been better to do a wider search, to have hired an agency to assist them, and to have selected advisors who specifically had experience in family businesses.
Once their CEO retired, an employment agency was brought on to find both a new chief executive and new advisors. The agency gave them a list of candidates that would fit their needs. Coincidentally, they found their new CEO, Dick Palmersheim, during the process of finding new board members.
Using manufacturing companies as an example, McNally recommends a few specific perspectives to make up an advisory group: someone with financial skills; someone who understands sales and marketing; an operational expert, specifically in modern manufacturing practices; and a so-called “technologist,” someone who understands technology in the field.
McNally added that most board members should have experience as a C-suite leader, such as a CEO, a CFO or chief marketing officer.
The prominence of the technologist role is one that has dramatically increased in the past five years or so, he said.
“Everything is being driven with new technology, whether it’s artificial intelligence, (or) it’s your digital marketing from your website,” McNally said.
The field of digital marketing is “the hottest category around,” he said. McNally noted there are seven digital marketing experts in Wisconsin that his firm has identified as good candidates to serve on boards. Three of those he has gotten on boards, and the rest are soon to follow.
Borst said it is also crucial to find people who are tied to the mission of the company or organization. Borst is a board member of two Milwaukee schools: The Institute of Technology and Academics and the Edessa School of Fashion. He and other board members who volunteer their time do so because they believe in the mission of the organizations but also have expertise that can contribute to their success, he said.
“Lots of people want to give money to causes but when it comes to putting in time and other resources into causes, they’re not always as willing,” Borst said.