Professionalisation of the composition of the board of directors in a family business

The challenge

How to change the composition of the board of directors in order for it to effectively lead a rapidly growing family business?
How to effectively conduct the process of change in the board of directors when the owners have no experience at all in recruiting at this level?

Background

For its first 30 years, the company was managed by three owners – until the size of its operations more than doubled over the last 5 years. The number of employees was steadily increasing in response to the growing demand for the company’s products. The owners gradually realized that it was increasingly difficult for them to run the company, as the number and complexity of operational tasks had grown significantly. Until then, all recruitment in the company was based on a single befriended recruiter, and through referrals and friends.

Diagnosis of the problem

Formally the company board comprised 5 members, although de facto 3 people (the owners) took the decisions affecting the company’s fortunes. The other two were formally members of the board, but their decision-making powers were very limited.
There was no such structure functioning in the company as a board of directors with its set of regulations or reasonably regular times for its meetings. Management of the company was conducted “on the go”, while staff would catch owners, for example in the corridor or on their way to the WC, to obtain directional decisions.
During the first talks the owners declared their preliminary readiness to implement changes in how the company was managed.
The board’s potential in terms of competencies and motivation was measured (covering the three owners and two additional board members). This revealed gaps in the board’s competencies, and explained why it was difficult to carry out certain things in the company.

Solution

In workshops with the owners we drew up a few-year plan for the gradual transition of specific members of the board of directors to the supervisory board.
We drew up requirements for positions in the board of directors in line with company strategy, taking into account the competency deficits.
We provided consultative support in the selection of a company providing executive search services and helped in establishing three-way collaboration.
In the group of candidates recommended by the executive search company we conducted psychological testing among candidates for 3 positions in the board of directors (CEO, finances, and sales). This included 6-8 psychological tests and an interview with each of the candidates accepted by the owners for further talks.

Results

Based on the information gathered by the executive search company, and the report from the psychological testing, the owners took the decision to employ 3 new board members.
The establishment of a professional board effectively managing the functioning of the company in a market experiencing constantly growing demand.
Adaptation of the management structure to the actual needs of the rapidly growing company.
Efficient transition of the owners to the supervisory board, almost in keeping with the schedule adopted beforehand.

“I was surprised by the efficiency of the work in the new board of directors. I didn’t know it was possible to operate in such a way.”