Insight: The Value of Advisory Boards for Family Businesses
Family-owned businesses account for 90% of all businesses worldwide, according to the Family Firm Institute. Yet despite their success, they face unique challenges, including succession planning, emotional decision-making, and balancing family dynamics with business goals. An advisory board can be a critical tool in addressing these issues, offering strategic guidance, accountability, and outside perspective.
Unlike a formal board of directors, an advisory board has no fiduciary responsibilities or legal authority. This makes it a flexible and cost-effective solution, especially appealing to privately held, family-run companies. The goal is to assemble a group of experienced professionals who can advise ownership on major decisions, from growth strategies to generational transitions.
One key benefit is objectivity. Advisory board members are not entangled in family history or politics, which allows them to challenge assumptions and provide impartial feedback. As Harvard Business Review notes, “bringing in outside voices helps avoid the echo chamber effect that can plague insular leadership teams” (Harvard Business Review, 2016).
Another major advantage is succession planning. Family businesses often struggle to plan for leadership transitions—sometimes due to reluctance to change roles or uncertainty about the next generation’s readiness. According to PwC’s Family Business Survey, only 30% of family firms make it to the second generation, and just 12% to the third. An advisory board can help outline a thoughtful plan, coach future leaders, and ensure continuity.
Advisory boards also promote professionalization. As family businesses grow, so does the need for formal systems, processes, reporting, and strategic discipline. Advisors can bring best practices from other industries and help the business evolve without losing its core values.
Finally, advisory boards can be a sounding board for innovation. With their diverse backgrounds, advisors can introduce new ideas and networks that family businesses might not otherwise access. As business consultant David Bork put it, “An effective advisory board can be a gateway to fresh thinking, opening doors to markets, capital, and technology” (The Family Business Advisor, 2019).
Forming an advisory board doesn’t have to be complex; the key is to recruit members with complementary expertise and respect for the business’ mission, vision, and values. Meetings should be structured and collaborative, with clear goals, accountability, and follow-up.
In summary, advisory boards offer family-owned businesses a powerful blend of accountability, insight, and strategic vision. By tapping into external wisdom, families can build stronger, more resilient companies that thrive across generations.
If you’d like to learn more about the impact that an advisory board can have for your family-owned business, join us June 18th for our virtual Family Business Exchange: Register HERE
Sources:
- Family Firm Institute. “Global Data Points.” www.ffi.org
- Harvard Business Review. “How Outside Boards Can Help Family Firms.” (2016)
- PwC Family Business Survey. (2021)
- Bork, David. “Creating and Using an Advisory Board.” The Family Business Advisor, 2019.