Next generation: Are You Prepared to be a Board Member?

It is common to see members of the next generation in their 30s occupy a seat on the board of directors. This is desirable as it’s a very important interaction point with the business or the family’s assets, where they learn about strategy and create the family’s vision for the future.

But as with most things, there is a good and a bad way to go about it. A professional board will hopefully include a good mix of independent non-executive directors, who are subject matter experts and family directors whose job is to protect the family’s long-term interests and the values that shape business culture. It’s a forum where serious discussions are held, and it therefore begs the question: How can members of the next generation understand what is going on, ask good questions, and be listened to when they speak up?

I’ve seen several instances where the next generation is catapulted onto the board without being told what is expected of them, without enough understanding of business, finances, or the industry where the business operates, and without the confidence to speak up.

The result? The family presents someone ill-prepared, which affects the family’s credibility towards the business, and the person in question has a bad experience that destroys their sense of self-worth and agency to engage.

The answer? Proactive preparation of members of the next generation before they integrate the board, including defined expectations, education, guidance, and support.

So, how can next gens ensure they are prepared?

Preparation requires a delicate balance of technical proficiency, soft skills, and a deep, critical understanding of the family’s values and vision. Below, I outline three essential factors to effectively prepare the next gen for a seat on the board.

1. Understand Dynamics

Before diving into technicalities, it’s crucial to grasp the unique dynamics of family businesses and family offices. These entities often blend personal and professional realms, intertwining family relationships with corporate governance. Future board members must comprehend this intricate interplay and appreciate the legacy, culture, and values that underpin the organisation.

Creating a board observer position for members of the next generation, with allocated mentors who can prepare them for the meetings and debrief them afterward can be an excellent way to ease into the role of director.

Also, members of the next generation should be told what is expected of them as they integrate the board: what they represent, the standards expected from them, and how they are expected to contribute.

2. Cultivate Technical Proficiency

This includes:

• Financial acumen: A solid grasp of financial principles is paramount for effective board stewardship. Future members should familiarize themselves with financial statements, budgeting, and strategic financial planning.
• Legal and compliance knowledge: A key responsibility of the board is to anticipate risks. Understanding the legal/regulatory framework governing the business ensures compliance and mitigates risk.
• Strategic vision: Board members should operate at 30,000 feet and must possess strategic foresight to guide the business toward long-term growth and sustainability. This involves analysing market trends, identifying opportunities, and formulating coherent strategies.

3. Develop soft skills

This includes:

• Communication and diplomacy: In the board room, there may be different agendas (and sometimes egos) from very competent people. Effective communication is the cornerstone of boardroom dynamics. Future members should hone their ability to articulate ideas, listen actively, and navigate complex interpersonal relationships.
• Conflict resolution: Given the familial nature of these enterprises, conflicts may arise. board members need to know how to deftly resolve conflicts while preserving family harmony and advancing the organisation’s interests.
• Leadership and influence: Leadership transcends titles; it’s about inspiring others and driving positive change rather than imposing or controlling. Future board members should cultivate leadership skills to motivate people, foster innovation, and lead by example.

Case in Point: The Arnault Family

If we look at the Arnault family, where 4 out of 5 of Antoine Arnault’s children sit on the board (and the youngest is 29 years old), there are very clear elements used to develop the next generation as competent leaders and board members:

• Early exposure to the business: Where their passion and understanding of the industry were cultivated from a young age
• Meritocracy: The children earned their positions through merit and hard work
• Mentorship and guidance: Antoine Arnault has taught and nurtured his children at every step of the way.

Conclusion

The ability to be a board member should not be defined by age (no need for grey hair) but by the ability to bring unique perspectives. The journey towards being on the board is not a destination but a continuous evolution and it requires a holistic approach – don’t parachute someone into the board room as an obvious succession step, make sure it’s a thoughtful experience for all those involved.

For further information about any of the insights shared above or to find out more about Bedrock’s Family Strategy and Governance services or events, please do reach out to Maria at info@bedrockgroup.ch.