Family business boards face a unique challenge. Their role isn’t just about oversight. It’s about protecting the family’s values while also pushing the business to thrive. But what’s right for the family and what’s right for the business don’t always line up, and managing this tension is one of the hardest – and most important – jobs a board can take on.
Balancing Heritage and Commercial Reality
Imagine a family business with deep roots in a traditional sector that’s now in decline. Commercial logic might say it’s time to exit, cut losses, and redirect investment into faster-growing markets. But for the family, this decision cuts deeper. It’s about identity, heritage, and pride. It’s about honouring the hard work of previous generations, the founders’ original vision, and the family’s deep connection to a particular place or industry. No one wants to be the generation that ‘closes the door’ on a legacy built over decades.
This is a common challenge. Many family businesses have deep emotional ties to the sectors in which they first made their mark. The idea of walking away can feel like letting down those who came before, even if staying put risks the business’s future. This conflict can stall decision-making, create divisions within the family, and put the business on a risky path.
Or take a business that has been funding significant philanthropic work for years. The management team might push for clearer oversight – to understand how much money is being diverted, why, and where it’s going. But for the family, this isn’t just about numbers. It’s about living out their values, being a force for good, and making a positive impact, even if it means tighter margins or lower short-term returns.
In both cases, the right decision isn’t always obvious. It requires a careful balancing act, one that goes beyond basic governance. Strong boards understand that their role involves stewardship, aligning commercial reality with the family’s broader purpose.
How the Best Boards Manage This Tension
1. Clarify the Shared Goal
Effective boards take the time to define where the family’s values and the business’s goals overlap. This might be through a family charter, a mission statement, or a set of guiding principles. Without this shared understanding, even small decisions can turn into flashpoints. For example, a family might agree that their purpose extends beyond financial returns, focusing on creating a positive impact in their community or preserving a specific craft or industry. This clarity helps boards weigh tough decisions against the broader goals of both the family and the business.
2. Bring in Fresh Perspective
Independent directors can make a real difference. They bring objectivity, challenge assumptions, and help the board avoid groupthink. They’re also less likely to be swayed by family dynamics, which keeps decisions focused on what’s best for the business in the long term. An outsider’s perspective can be particularly valuable when the family is too close to an issue to see it clearly, or when deep-rooted loyalties risk clouding judgment.
3. Structure the Decision-Making
Effective boards don’t rely on gut feeling alone. They have clear processes for evaluating major choices, balancing financial logic with family priorities. This might mean setting clear decision rights, establishing family councils, or creating governance frameworks that define when the family’s voice should lead and when commercial logic needs to take priority. For example, decisions about significant investments, hiring non-family executives, or major strategic changes might require broader family input, while operational matters are left to management.
4. Keep Communication Open
Regular, honest communication is essential. Family councils, shareholder meetings, and structured feedback loops keep everyone on the same page and prevent misunderstandings. Without this transparency, small disagreements can quickly escalate into bigger issues. For example, a family that regularly discusses its shared goals and business challenges is less likely to be blindsided by disagreements over dividend policies or succession plans.
5. Develop the Rising Generation
The rising generation is the future of both the family and the business. Boards that invest in developing emerging leaders are more likely to find a balance that works in the long term. This means mentoring, structured development plans, and clearly defined roles, so they’re ready to lead when the time comes. It also means being realistic about who has the potential to lead the business and who might be better suited to other roles, whether inside or outside the business.
6. Embrace the Tension
Tension isn’t necessarily a bad thing. It forces tough conversations, surfaces potential issues early, and leads to better decisions. The best boards create a culture where tough questions are encouraged and where every voice, family or non-family, is genuinely heard. This can be the difference between a board that merely exists and one that adds real value to the business.
The Right Balance Takes Work
A strong family business board does more than just provide oversight. It’s the strategic core of the business, connecting the family’s legacy with its long-term potential. When this balance is right, the business doesn’t just survive – it thrives, generation after generation.
But this balance doesn’t happen by accident. It requires clear thinking, structured processes, and a commitment to open, honest conversations, even when those conversations are uncomfortable. For many families, this is the hardest part of the journey, but it’s also the most important. When family and business interests align, the potential for long-term success is enormous. But when they drift apart, the risk of division and even failure becomes very real.
About the Author – Oliver Denton
Oliver Denton is Associate Partner at TWYD & Co, a private talent advisory firm focused exclusively on family businesses and family offices. TWYD supports family businesses with the complex challenges of leadership, including the appointment of non-family executives and independent directors, as well as aligning boards with long-term family goals. Through its BASE (Board Alignment, Structure & Effectiveness) service, TWYD also offers board effectiveness reviews, benchmarking family business boards against their peers to ensure they remain fit for purpose as the business and family evolve.