Co-Presidency Doesn’t Work for Most Family Businesses

by Mike McGrann, Executive Director, S. Dale High Center for Family Business

Mike McGrann

It’s not uncommon for family businesses to have two rising executives (two siblings, two cousins, etc.,) both of whom feel they are the right person to become the next president.

If that sounds like your family business, should you be thinking co-presidency? It may seem like the easy answer to a tough succession decision.

However, the fact that it is an easy answer does not make it the right approach. There’s a good reason why the United States has only one president. I am reminded of a comment from former U.S. President George W. Bush, the guest speaker at the 2011 Lancaster Chamber dinner, who said, “The President gets lots of input from many sources. My job was to make the call based on the information available.” In this system, there is no ambiguity about who is responsible for making the tough call.

Family businesses, like all organizations, require a clear hierarchy to function effectively…and having one highly qualified individual at the top of the organization is the most effective way to achieve a clear hierarchy. The challenge with co-presidencies is that, by their very nature, they lend themselves to ambiguity about who makes what decision, and when that decision can be made. This kind of ambiguity at the top of an organization is deadly and quickly leads to confusion, organizational inefficiency, lack of productivity, etc.

Is a co-presidency right for you?

Often the decision to appoint co-presidents is often made because of the potential family conflict that would arise if one family member is chosen over the other. The merit of who is really most qualified to lead the company gets lost in the fear of conflict and hurt feelings that one family member “won” and the other “lost” in the succession marathon.

This is not to say that co-presidents cannot work. In fact, Mars and Smuckers, two of the most competitive and successful food manufacturers in world have long history of effective leadership from two brothers who served as co-presidents. Tim and Richard Smucker operate their business based on a clear set of roles for each brother, constant communication between them, and a high of degree of trust in each other.

So if you are leaning toward co-presidents, you’ll need crystal clear roles and a process for resolving disagreements when the roles of the co-presidents overlap (A&B below). A Board of Directors can be effective in this role.

Mike’s Bottom Line: If you are going to appoint co-presidents of a company, it should for the right reasons: you have two highly qualified family members with distinct skill sets whose roles and responsibilities have been clearly delineated—not because it is the easiest way to avoid a family conflict.

The three responsibilities of a Board of Directors

by Gale Martin, Director of Marketing and Membership at the S. Dale High Center for Family Business

Blanching at the thought of instituting a Board of Directors for your family business? You're not alone. Many family business executives don't like the idea of empowering a group of people who'll now make decisions the chief executive is fully capable of deciding him- or herself.

According to Bill Alexander, the May presenter at the S. Dale High Center's Educational Seminar Series, such a concern may be unfounded, that there are three (and only three) functions of a Board of Directors for a family-owned business:

1. Ensure the company has a clear direction (approving strategic and annual plans).
2. Ensure assets are properly employed to the benefit of shareholders (approving human resources plan and capital expenditures).
3. Ensure there is empowered and competent leadership in place (electing officers).

Now that sounds like a reasonable set of responsibilities for a board of directions--one that supports family business executives without interfering in issues that aren't the board's concern.

Based on Bill's guidelines for boards of directors, have you ever served on a board or staffed a board where directors where given responsibilities outside this well-defined purview of what boards should do? If so, what were the results?

A Family Constitution is a great governance tool...

by Mary Beth Matteo, Founding Director of the S. Dale High Center for Family Business

Many family business leaders stop thinking about governance because they associate it only with a Board of Directors. In reality, governance has many aspects to it:

• Family Councils (to facilitate open communication among family members)

• Boards of Directors and/or Advisors

• Family Constitutions and Mission Statements

• Leadership Development for the next generation

One of the most effective and important tools for the family is the Family Constitution, which is a legal or quasi-legal guide on how to put the family’s priorities, values and mission into action. In essence, it’s a blue print for everything the family intends to do. Here are some areas that are usually included:

Owner Commitments, Rights and Responsibilities: might include guidelines for Ownership, Inheritance and Succession, and Personal Development of family members. Even, marriage and divorce.

Finances and Investment: might include who owns assets, stock agreements (buy, sell and exit) who can purchase and sell shares, and how it will be done.

Family Employment and Compensation: generally includes rules of entry, how jobs will be offered to family, supervision/mentoring, and fair compensation.

Check out a sample family constitution, from the Carjaval Family, SMEToolkit.

Sum and Substance: Something is better than nothing in the world of governance! As with the Family Constitution, starting out small and adding sections as you go along is just fine.


Let us know your thoughts in the comments section of this post:

Does your family have a constitution? How has it helped your family?

So, a board of directors isn't for you? You have options . . .

by Mary Beth Matteo, Founding Director of the S. Dale High Center

What if a board of directors is not for you? Three things usually present obstacles to developing and implementing a board of outside directors: you believe your company is not big enough; it would be very difficult to “staff” a board with the required data; or, your company doesn’t have the funds to pay outside directors.
So, what are your options? The best way to answer this is to look, first, at when a board is most useful. Here are a few reasons to look to outside advisors:

• Your company is embarking on something new, e.g. entering a new market or developing a new product

• You are entering a period of rapid expansion and your company would benefit from the advice of a company that has been through it

• You have faced some major setbacks and would benefit from the insights of a company that has successfully weathered a storm

• Your company is doing strategic planning and could use advisors to force you to think outside the box

You have a couple of choices in lieu of a full board:

• A Board of Advisors, hand-picked to address a particular issue

• A mentor or business advisor, an expert in a particular field

• A consultant

• Peer Evaluation Teams, a carefully selected group of peers, such as one sponsored by your trade association

Sum and Substance: any of these options is a good first step, sometimes an all-important one. However, it’s important to remember that there are certain things only a Board of Directors can do. Only a Board of Directors can guide your company over time. Only a Board of Directors can “take you off the hook” by providing objective standards for your family! Only a Board of Directors can remove the ambiguity from family business decisions, and build trust! These are also important aspects of family governance.