June 22, 2021 - You are weighing the benefits of establishing a formal Board of Directors, or perhaps you already have one. Whether it is an Advisory Board, Fiduciary Board, or Owners Board, your considerations must include the roles that family members might play and how best to prepare them for service. Separate from outside Directors, who are identified based on strategic and skills-based experience from years of outside Board service, family Directors may be asked to bring different perspectives and qualities. However their role evolves, the question of how to best prepare them has undoubtedly crossed your mind. From our inception as a single-family office in 1923 to our evolution into a pioneering multi-family office, Pitcairn has always known and benefited from different classes of Board Directors. For decades, we have built a Board of family Directors and outside Directors, both serving important roles and bringing a diversity of experience to our fiduciary duties. As a fourth-generation Pitcairn family member, I am fortunate to be part of one of the world’s leading family offices. I want to share several key strategies Pitcairn has implemented over the decades to bring the next generation of family leadership up to speed on Board service.
Align Expectations for Outside and Family Directors
One of the first questions we ask in the process is, “are our expectations from family Directors different than outside Directors, and if so, how?”
We always aim to align our expectations around varied skills and experiences. Do we expect family members to bring consistent skills and experience, or do they bring different attributes equally important and complementary to Board function and owner representation? Sometimes a family member is brought on to represent a branch of the family, and other times, to fill a mandated family successor leadership role (think Board Chair, trustees, and bylaws).
For example, you may need to have an outside Director chair your Audit Committee, a position where robust experience is necessary. For other Board roles, you may want a Family Director who understands the ownership group, history, and evolution of the family and bridges the cultural and emotional aspects of a family-held company. Both experiences are valuable and necessary, though very different.
Develop a Strategy to Identify and Inform Future Family Directors
The second question to ask is, “how are we identifying and giving experience to interested family members?” Consider if you have a platform to educate family members about the history, legacy, family tree, enterprise structure,
and operating company. Identify how best to communicate and educate, whether it is a resource center or newsletter. And make sure to create intimate events to share stories, learnings, and fellowship, whether they take on the form of owners’
meetings or family retreats.
For Pitcairn, this has historically been a function of our Family Council, and the first point in our charter reads, “Give experience to and help identify potential future Directors….” Every Pitcairn Family Director has been a member of our Family Council, and by virtue of that membership, has had 1-3 years as a Board observer before becoming a formal member. A resource platform like the National Association for Corporate Governance (NACD, Diligent, etc.) can also offer value to all Directors looking to identify and implement best practices.
Lead by Talking and Listening to Others' Concerns
Third, communicate transparently so everyone knows the rules and feels included, especially around the selection process. Most people say they communicate well, though often, it is easy to forget that effective communication has two facets—talking and listening. Too often, leaders are afraid to ask questions and listen, for fear that they may hear concerning issues or requests they cannot meet. An ability to move toward discomfort separates true leaders.
A few years ago, I was speaking with one of our Family Council members who I thought had real potential to step into key roles in the future. Upon asking him or her if they had interest in a more formal role, they said to me, “Andrew, I do, though I feel that I have been told the company wants people to step up, but I see no clear path forward or process to advance.” That valuable feedback catalyzed us to review our advancement process on many levels. It is an ongoing process that continues today.
Navigate the Process with Outside Support
Fourth, do not go at this alone. As families grow, it can be difficult enough to maintain healthy family relationships. Adding formal roles within a family enterprise can quickly strain these bonds. Utilizing a third party to help codify the expectations so everyone knows and understands the rules of the road can turn a potential nightmare into an opportunity to build consensus. Also, do not underestimate the value of having an outside consultant as the lightning rod.
At Pitcairn, we brought in a consultant to help us conceptualize what the Board of the future may look like. We examined where we had been, where we were, and where we wanted to go. Our examination also created a safe place for people to discuss real challenges and concerns, leaving most feeling heard and valued. This consultant also helped us discuss Board Chair succession, and through a transparent and thoughtful process, we broke tradition and elected our first non-family Chair. We came out of that exercise a more cohesive and functional Board.
Our experience can serve as a starting point for you and your family, to be adjusted according to your needs, history, and skills. Certainly, it is not a one-size-fits-all process, and I encourage you to step out of your comfort zone. I think you will be pleasantly surprised by taking this journey. Remember, it is not always about best practice, but practicing what is best for you and your family.
Set clear expectations, develop an education platform, communicate by speaking and listening, and ask for help before you run into trouble. With some hard work and maybe a little luck, you will share your success story in seven generations!