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Perspective: A Non-Family Chairman of a Family Business's Board

Phil Grybas is an Independent Director of a family owned telecommunications company and CFO based in Chicago.

SRG: You’ve had an accomplished career in telecommunications and finance, culminating in your position today as the Executive Chairman of a family owned business. How were you introduced to the business, and why were you selected for the role?

I attended a telecommunications conference and while there met a family owner who was the present CEO of the business. At the time, I was the CFO of a publicly held communications company in California. We met at the same conference the following year and it was shortly thereafter when I was approached to interview for a new independent Board Director position. They were looking to bring financial expertise onto the board. Since I was a CFO and CPA by profession and in the same industry, I had the qualifications they were seeking.

SRG: What is your working relationship with the business owners? How often do you meet and how is your contribution measured?

I have been on this board for 12 years. The working relationship with the business owners has evolved significantly over time. I was initially viewed as a “hired gun” and now I am a trusted business advisor. Prior to the sale of the company, we met four to five times a year in face-to-face meetings at the company’s headquarters, and then we would also have occasional conference calls. During the sale of the company, I typically had ongoing conversations with the board and shareholders every week, and our face-to-face meetings almost doubled. My contribution was measured by the evolution of financial information presented to the board, the establishment of a verifiable budget process, and the creation of an annual bonus methodology for senior executives. So, contribution was measured by the deliverables completed during the year.

SRG: What is the role of a board in a family business, and what advice do you have for a business forming a formal and/or advisory board?

Nose in, fingers out. The role of a board member is to provide expert advice and insight--gleaned from the board members’ experiences--to the family as decisions about the business are deliberated. Additionally, there are times when a board member must individually coach a family member in given situations that arise. Communications skills are extremely important. In terms of constructing a fiduciary or advisory board, look for candidates who can bring specific expertise in areas where the family lacks depth or knowledge. Be willing to be open to a different viewpoint. Ensure that personal chemistry between the candidate and family members is compatible. Do not be afraid of change and support positions taken with facts versus pure opinion.

SRG: Establishing trust between a new board member and the family business is a critical first step. What advice do you have regarding vetting and qualifying new candidates for board positions?

Look beyond a candidate’s experience and credentials. Examine closely a candidate’s accomplishments, how they were achieved and under what circumstances. Have the candidate provide specific examples of what advice was rendered to a family business and what was accomplished as a result of the advice. Do not be afraid to look at candidates that may not have specific industry experience for they may bring a perspective that enables resolution from an objective viewpoint. Do not leave a new board member to fend alone. Spend time educating the candidate about nuances of the business or family approaches that aren’t readily apparent. Don’t make board sessions so tight that they don’t allow for socialization either before or after the meeting OR that don’t allow the Board to spend enough time covering critical agenda items that necessitate sufficient discussion.

SRG: In your experience, what are the major mistakes a business can make when either forming a board or recruiting a new director?

Recognizing the need for a board with independent directors to be formed is essential. I was once invited by a family business owner to discuss the value that an independent director could bring to the family’s business. Unfortunately, other family members did not agree that a move to add an outside Board member was necessary at least at that time. After an awkward day of meetings, the decision on whether to hire an independent director was tabled. The benefits that a board or new director can bring to a family company can be substantial, so it should be clearly laid out, vetted, and discussed prior to recruiting a new director or forming/expanding the board of directors.

SRG: You have described the board as a voice of reason through difficult times. What are the keys to successful guidance under such circumstances?

It can’t be overstated how intense family dynamics can be at times due to different agendas or viewpoints. A respected, trusted independent director can help the business maneuver through such differences and bring objectivity to the table--provided that the director listens to both sides and unemotionally outlines pros and cons. Never, ever criticize an opposing viewpoint publicly, and only when needed bring up weak points privately. Address objections patiently and support them with objective facts whenever possible. Consider whether certain discussions are worth the effort now or better postponed to a later date.

SRG: Putting aside professional experience, what are the character traits necessary for an independent director to be successful in their role?

An independent director has to be an excellent listener. They must be willing to digest opposing viewpoints and be able to objectively glean important facts that can ultimately result in a decision supported by a majority. A person must have the courage to voice their convictions as necessary, support positions with facts, not just opinions, and admit - at least to themselves -when they are wrong. Do not rush into making a decision when details or facts are not fully available. Be willing to be a sole dissenting vote rather than succumbing to the easier route of going along with the majority. Prepare for all meetings completely and have questions formulated in advance. Hold management accountable for following up on questions that were not adequately addressed during the meeting. Always remember: if something can’t be measured, it’s worthless.

SRG: Consensus building can be a challenge in any business, but it is a particular challenge when family members disagree. In your experience, how do you effectively bring all parties to the table and come to an agreement?

Know--never assume--the exact points of disagreement and chart the course accordingly. Mediate privately, if possible, for maximum flexibility. Present a disagreement in terms of how it looks from a “good governance” standpoint as determined by objective sources. Enlighten rather than refute or dismiss. I have found that presenting a thorough analysis of pros and cons allows for full discussion and eventual ownership of the solution. Allow family members enough time to come to a conclusion on what is right for the family as a whole rather than concentrating upon a particular individual’s situation.

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