In a recent article in the Financial Post, “Advisory boards boost Canadian small businesses, but only 6% use one, study says,” Armina Ligaya describes how advisory boards can make a difference in your business.
According to a study conducted by the Business Development Bank of Canada of 1000 small and medium sized businesses in Canada, those with advisory boards are more productive and experience higher growth rates. Advisory boards are found to contribute significantly in the areas of innovation, risk management, vision and profitability. In sum, advisory boards are found to better inform the decision making of entrepreneurs. However, only 6% of those surveyed have advisory boards and only 19% have boards of directors (which can perform a similar oversight function).
In my experience, all companies can benefit from an outside board of advisors or board of directors, but in a closely held family business, this is even more critical to its long term success. The very strength of family businesses (namely family members striving to build, uphold and endure the honor of the family legacy) is also its greatest weakness. Many family businesses, particularly those that are passed down to the next generation, can suffer from sibling rivalry, favoritism and mistrust.
Family businesses are most in need of what only outside advisors can provide – objective and professional advice. This not only strengthens decision making but also helps bestow confidence on non-management family members in the way family businesses are run.