Episode Description:
Marcy McNeal, a business transition guide and coach at The Transition Strategists, once again joins host Elizabeth Ledoux for today’s episode.
In this episode, Elizabeth and Marcy discuss the importance of business governance in family-owned businesses during transitions. They emphasize that governance provides a structured framework for decision-making, fostering inclusivity and reducing personal friction. Tap or click the play button below to listen to: Business Governance: What Do Families in Business Transition Need to Know?
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Marcy highlights that governance can take time to implement effectively, with a typical timeline of around 6 months for comfort and around a year for consistent use. Elizabeth adds that governance helps in slowing down decision-making to ensure all voices are heard and decisions are transparent.
Connect with Marcy McNeal on LinkedIn: https://www.linkedin.com/in/marcy-mcneal/
Read Marcy’s profile: https://transitionstrategists.com/our-team/marcy-mcneal/
Chapters in this episode:
4:00 Defining Business Governance
4:37 Typical Governance Structures and Business Transition Challenges
9:47 Family Dynamics
12:24 Starting the Business Transition Process
20:39 Decision Levels
24:10 Implementing Board Governance
28:55 Maintaining Family Relationships and Board Effectiveness
Connect with Elizabeth Ledoux and the Transition Strategists:
Website: https://transitionstrategists.com/
Facebook: https://www.facebook.com/thetransitionstrategists
Elizabeth on LinkedIn: https://www.linkedin.com/in/elizabethledoux/
Transition Strategists on LinkedIn: https://www.linkedin.com/company/transitionstrategists/
Transition Strategists on YouTube: https://www.youtube.com/@transitionstrategists
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Business Governance: What Do Families in Business Transition Need to Know? Transcript
Marcy McNeal: It’s probably four or five, six months before, I think they sort of get com more, they get more comfortable, maybe a full year before they kind of hit a stride of, yeah, okay, we’re we’re really doing it, and this is working. I think they do experience it working before a year, but like, consistently, like, we’re really, we’ve really embraced that this is the place we have these conversations. We’ve really embraced that this is where the decisions get made. Because I think it’s tempting, you know? It’s tempting like, Oh, we’re in another meeting over here. Can’t we just have that conversation? And for someone to say, actually, no, I think that’s a board agenda item like that’s when you know they’re actually hitting their stride, when they actually can stop themselves and say that’s a board meeting agenda item, not a staff meeting, or whatever kind of leadership meeting, or whatever the case might be. I would say that’s when they’ve really embraced it.
Elizabeth Ledoux: Welcome to the Business Rransition Roadmap. My name is Elizabeth Ledoux, and through my years, I have seen how communities thrive when business succession and transition are done well. Me and my team at the transition strategists have been helping business owners develop and implement transition strategies for over 30 years, and on this show, we want to help you by giving you the roadmap to a healthy business transition. Let’s get started. Hi everybody, and welcome back to our Business Rransition Roadmap. We are so fortunate today to have Marcy McNeal with us. Marcy is one of our transition guides here at the transition strategist, and today’s focus for the podcast is on business governance. You know, we talk a lot about business governance, and sometimes that’s a pretty frightening thing. Sounds like you might be, you know, put into a box, and you won’t be able to make decisions, and it’s going to be very constraining, and all of these other things we see that all the time, and what we’ve found is the business governance is actually one of the most powerful things that you can do to move forward in a transition roadmap. It is just incredible the opportunities that exist there. So I’d like to welcome Marcy and thank you so much for being here to talk about business governance and your experience with business owners.
Marcy McNeal: Absolutely. Thank you for having me back, Elizabeth. I always love joining you here, and I’m very excited about this topic because it’s such a powerful tool for Families in Transition, especially because it really creates that opportunity for them to have the important and sometimes hard conversations. So really, really excited to be here and talk about this today.
Elizabeth Ledoux: Terrific, terrific. So, um, so yeah, again, Marcy’s one of our transition guides, and just has a lot of experience in this area. So how about we start with just kind of defining when you think about business governance, what is business governance in a current state, typically in a business like so we’ll start there, and then, what is a business governance that actually supports and helps in a transition? So what have you found?
Marcy McNeal: Yeah, I mean, I think in your intro, you spoke to kind of what a lot of people envision is that it’s going to be business governance is, you know, people who are going to tell us what to do, it’s going to be very limiting. It’s going to be hard, and I’m not going to get to do what I want to do. And in the work that we’ve done and the or the organizations and families that I’ve worked with, it’s the opposite. It actually becomes this amazing source of freedom where people’s voices are heard. Everybody gets included, the conversations happen in the appropriate setting. You know, not because we passed each other in the hallway and tried to make a big decision, and it was just two of us, and now other people don’t know what’s going on, but we decided. So it really provides that structure, and it also, you know, in the families that I’ve been working with with the transition strategist, it’s a learning ground, because most often, not everyone has served on a board, or they’ve served on a board of a nonprofit as a board member. But now it’s different. This is your this is your business. This is the business that you’re hoping to take forward. You know, as a transition happens, so it’s the structure to learn how that op how that works. It’s a structure to develop and have in place to go forward, because there will, hopefully, if the business goes well and it there’ll be another transition at some point down the road. Why not have that in place? Place for the next generation or the next owner to have that structure that’s working really well. So it’s, it’s, it’s actually a tool that does bring freedom as opposed to limitation, which is pretty cool to see. Yeah, absolutely
Elizabeth Ledoux: so. So when you start working with businesses, and we start down the road of, you know, creating their transition roadmap. What is a typical governance structure in a business that we that you start with?
Marcy McNeal: Oh, typically it’s just the owner, somebody who just makes whatever decisions they want to make, like and they’ve always gotten to do that, you know, I’m the owner. I’m the only owner. I’m going to decide. And that maybe worked really well as you were creating the business and growing the business, and you had to be nimble, and you had to somebody, had to just be in charge and make some of those tough decisions. And now, as the businesses have matured and they’re stable, and they have opportunities to to expand and grow, and there’s more people now, there’s more people involved. So it’s gone from one person got to decide everything, to now the you know, all of my kids are shareholders and owners, or someone that you know came from inside the business is now going to be the owner. There’s more voices at the table, so we have to expand the structure to make room for that. And that’s not always easy for the person that got the one person that got to make all of the decisions for a long time, and they knew that their decisions were the right decisions, and even if they weren’t the right decisions, they could own that they were the ones that made them. So it’s, it’s, it can be scary for that person, because it is part of the transition that’s part of the letting go and trusting and that board governance, again, provides the appropriate structure for that trust to be built and for that control and decision making to be shared and spread across those additional voices, and then eventually that one person stepped out, you know, when they’re ready and When the business is ready for them to do that. So, yeah, I It’s pretty cool. I love that. I love to get to see us bring that owner who’s really ready to make that transition into that new structure, and let them, let them kind of play with it, get a little uncomfortable with it, and hopefully embrace it as well as the other people that are better on the board. So,
Elizabeth Ledoux: yeah, absolutely. And what I was thinking about while you were talking about that, is the idea of slowing down. There’s, you know, is there? I guess a slowdown for the owner, because they can’t make decisions as quickly, right? They can’t pivot as quickly, because there’s potentially then a board meeting or an agenda or something that it gets put, you know, put forward onto, and then discussions and other things. But I would think it would be really interesting to be that owner, and have to slow down like that.
Marcy McNeal: It’s, that’s a fantastic point. And yes, it it suddenly is. It can almost cause a little friction, right? Like, I don’t get to just make that decision today and implement it tomorrow. And and, you know, they’ll probably do that a few times, and they’ll probably have to have a conversation with the board about, okay, no, why did you do that without us? And, you know, so there, you know, there’s again, learning. There’s learning on both sides of what that looks like to slow down and to let those other other people be a part of that decision making process. So that’s the owner who’s letting go, and then the new folks, whether it’s your you know, whether it’s children or whoever the successors are, for them to also recognize the structure exists, to say, wait a minute, we we didn’t get to be a part of that conversation, and they might still have said the same thing. They might have made the exact same decision, and it would have gone the exact same way. But the structure is there. We have an agenda. We have a specific time. This is when we meet. This is when we talk about this type of decision. And, you know, is so definitely it’s it’s learning on both sides of that of that board governance model and that board governance structure so but could be very challenging for someone who likes to move quickly, and now has to take a minute and pause and say, Okay, other people have to get to participate in in this
Elizabeth Ledoux: absolutely well and behavior change is really tough. Off, especially when you’ve done it for years and years and years and and even the dynamics, I think of having, you know, if it is a family, because you can do this, I with, you can have a board with other partners that are non family members, if you’re in that situation and your successors are non family. But if they are family, just changing the dynamic from being father or mother and children to being more on the board side more peer oriented, right? Because on that board, the board is more peer oriented, yes, yeah.
Marcy McNeal: I mean, that’s something we do spend. You know, when we work with with families in their board governance, and sometimes we even are in their board meetings to help support them, guide them, educate them, all of those steps, and we talk about the roles, like, what hat are you wearing right now? Oh, are you being the son right now? Are you being the mom right now, or are you being equal owners right now? Are you being the employee and and some of those roles, they don’t have a place at the board table. They they shouldn’t be there. And to be mindful and and watch themselves, like you said, behavior change. Just be noticing the behavior of, oh yeah, I’m slipping into a 12 year old right now because mom said such and such and everyone being okay with with like, no, that’s not my role in this moment. I need to, I need to step back. I need to look at it from this lens, not this lens over here, even though this one’s important to me. But this is what we’re committed to building. This is what we’re committed to moving forward, our legacy, our business, for our family, all of those things. And I really think when it, when the when things get maybe a little tense or a little little bit of friction there, what I know is so important to come back to is, what is that commitment? What is the commitment each of them have for the business? Because that can read presence and have you shift from okay, I’m taking this personally. I’m thinking about it only from my best interest or my perspective, and that’s not going to get us where we are committed to going. And so that’s I think, we bring that sometimes to families who are new to the structure and navigating, navigating those conversations. Because, I mean, they are always going to be mom and dad. They are, are always going to be the kids. But it’s, you know, to shift to we have equal equal ownership or equal participation and equal voices in this conversation, and at this table is important, and at times can be challenging, but really, really worth it when we provide that guidance and they see and then they get to experience, wow, that was an amazing conversation. We came to a decision, and we’re all good, we’re all okay with it.
Elizabeth Ledoux: So, yeah,
Marcy McNeal: it does, it does happen, and it’s really it’s been you. And I think when we get to work with these families and do these scenarios, we get it’s really fun for us to see. It’s fun to see the it’s fun to see the light bulb go on. It’s fun to see the progress they make, the growth they the growth they take. And they may not even realize, like, Hey, we’re operating really, really well. And we see it, it’s like, yeah, look how much you’ve like, how far you’ve come. You’re making decisions. You’re getting through topics, you know, yeah,
Elizabeth Ledoux: the other thing, and then I have a comment and then a question for you. But the other thing that I think is so interesting is, yes, of course, operating mode, but also the opportunity to have, for people to be whole, for people to be feel like they are included and they are important, and that they are in the know, and they are not being left out because the conversations are there and they’re not someplace else, like you said earlier in the hallway, or those kinds of things. So there’s a there’s a huge honor of the person that happens with this?
Marcy McNeal: Yeah, yeah, absolutely, yeah. I mean, these are not the conversations that should happen at Sunday night dinner or Thanksgiving or, you know, that’s not, that’s not where you have these conversations. That’s, that’s, it’s just, it’s not the right place. It’s not appropriate. You know, this is because you have to be in a different frame of mind you have. You need to be focused on what’s the intent of our of our meaning of our conversation, and you know you’re going to lose it in those other settings, definitely, or you’re just going to forget. You’re just going to forget. Like, this seems like an easy thing to decide. We’ll just do it, and then people are left out. So that’s. So
Elizabeth Ledoux: my question for you is, let’s say we’ve got a business owner who’s starting to think about transition, and they’re beginning to, you know, they’re kind of thinking, Okay, well, how am I going to do this? How am I going to get people going. How do I start? So if I, if I was that business owner, what, where would I start? What steps do you take people through? Do we take people through that to walk into this instead of just the big legal documents?
Marcy McNeal: Oh, goodness, oh, yeah. Well, big legal, big legal documents are, I mean, they have their place, right? Sometimes we do need to have those legal documents so everything is all tidy and everything is where it needs to be, and everyone understands what they’re committing to. But that legal document, starting with a legal document means all the voices have been excluded. They’ve just been excluded. One person’s voice is presented. And, you know, so couple things when someone is starting to think about their transition, and we have the opportunity to connect with them and share with them what could be possible. First, we want to we first. We want to help them get really clear on their objectives. They are the owner, right? They are the the per maybe they’re the founder, maybe they’re not, but they are the owner. They are to at this point, the decision maker on what will happen next. But what are their objectives? And we really encourage and and get people to look at what are there? What are their objectives, not just for themselves, but for their family, especially if it’s a family business transition. What does that mean? How does that How do you include that family? How do you include all of the family, whether they work in the business or they don’t, or maybe none of them do, I don’t know, but, but family is a piece of that, and so when they get their objectives, then it can be a conversation of even if you don’t know how exactly it’s going to look the transition. But then the opportunity is there to invite people. You invite people. How might you want to be a part of this? How might you want to engage in this business? What could that look like? What might this mean for your future? What does it mean for your own objectives, for yourself and your own family, if they have, you know, have others, and you know that invitation is is so powerful. It’s just so powerful, because without it again. No one those voices aren’t represented, and then people just feel like the transition is done to them. You know, Dad just decided here’s what it’s going to be, and we can all like it or not, or take it or leave it, and as opposed to creating something that achieves most of the objectives we possibly can. You know, setting, putting the odds, we like to say, putting the odds in their favor that they’ll meet as many of them as they can. And, you know, yes, dad will have his own thoughts and opinions, and everyone else will have their thoughts and opinions. And but at least there’s a there’s a place to have those conversations and and sort it out, and sort it out, and be be honoring and respectful of of each other and what everyone brings to the table,
Elizabeth Ledoux: right? And then so if, if I was that owner. So now I know what I want, and I know, kind of, I know what I want, and I sort of know who’s who would be involved. So at least I got that far. I may not have my full roadmap in front of me, but I got, I have a concept, and I just decide to start with governance, right? That’s what I’m going to do. Then what? How do I even decide, like things, you know, how is it going to work, and how many people, and all of those other things, because having a board takes structure. So yeah, what’s that?
Marcy McNeal: Well, one. So, you know, one of the tools that we have, that we use, I think it’s really valuable, is creating a basically a fan, like a board charter, and this is how we’re going to set it up. This is how many times we’re going to meet. You know, this is the standard topics we’re going to cover. You know, we help them create kind of their typical agenda and the structure and flow of that. You know, board roles. What does it actually mean to be a board member. You know, are you going to get paid? Are you not going to get paid? Or, you know, are you going to if you’re in the business as an employee? What does that mean? How do you get to participate if you’re a family member? So it’s really that charter document that we guide families through is kind of the cornerstone of okay, we’ve agreed on. This is how it’s going to operate as a board. But that’s just the first step. You have to have that piece, and then you start doing it. Then you just, you got to have a board meeting. You got to start with one and try it and make mistakes and have successes. And you know, if possible, have a guide, have someone that can be there with you who’s who’s experienced it, and can provide that perspective and examples and and support on working through those agenda items. Because sometimes those conversations can get a little, they can get a little, you know, long. We only have 90 minutes here, guys, we gotta move it on. But, but those, I would say that charter also. Then there’s, you know, we help them, kind of we help them look at their decision levels. Okay, what levels are decisions in the business going to happen? What are we going to make decisions on? What are we going to empower our employees and our leadership to make decisions on? And then they report up to us how that went. So decision levels is very important, especially for the person transitioning out, because they’ve been the decision levels, and now it’s where is it all going to reside. And so I think those, those three things, you know, are incredibly helpful, yeah,
Elizabeth Ledoux: and you know, just in experience, the two documents that you just talked about are foundational documents. They give you the groundwork that you need to do that and and it so many times in my many years, business owners just don’t want the governance, because they think that they’re going to give up the control, and they also are really unsure though about having a successor who comes in and is basically the runaway train, right, with all that young energy and new stuff and new ideas, and so I in the years the decision levels, that was one of, I think one of the most important components that we put into our process was to have that, because it’s sort of like a break and an accelerator. You know, you can move decision levels and value like, you know, money levels values, either to from shareholders, owners to the board to your executive leadership team, you can, you can keep more at the board, push more to the owners, push more to the exec team, depending on your level of confidence and trust and also their level, the successors, level of experience and thoughtful decision making. So it’s such a cool thing to have those decision levels. It’s amazing.
Marcy McNeal: Yeah. I mean, to your point, something I would add, Elizabeth is we should, you know, no owner should expect that they’re just going to toss the reins. I just trust you implicitly with this thing I’ve built, and I know you’re going to make all the right decisions, so those documents and the board governance structure allows them to see and witness and grow their confidence in their successor, to be able to see okay, they’re getting it. Okay, yeah, that’s that decision. Makes a lot of sense. I fully agree that’s a great idea. You know, it, it’s, it’s a process of letting them see that, yeah, to just grow their confidence in that successor, and for their confidence, or their their successor, to become confident, like I made a decision that they thought was great. So, yeah, I mean, that is, it goes both ways, but it is a great place for that to happen in a very formal structure, which is, I think, a really great tool.
Elizabeth Ledoux: Yeah, yeah, I agree. So. So when a family or an owner, let’s say if they’re in partnership or bringing in successors that are non family, when they decide to put, you know, these documents into place, and then they decide to launch their board. In your experience, how long does it take for the board actually to start functioning, quote, unquote, properly?
Marcy McNeal: Yeah. I mean, it does depend. It does depend, I think, on the the level of education that board members have. You know, some of them are coming in having served on a board for some other organization, so they have a little bit of knowledge. But it’s different. When it’s your agenda and your topics, some board members are going to be like, I don’t even know what the agenda is. I’m not even sure what we’re doing here, really. So it really, it very much depends on the where we’re starting. But I mean, it’s probably four or five. Six months before, I think they sort of get come more, they get more comfortable, maybe a full year before they kind of hit a stride of, yeah, okay, we’re, we’re really doing it, and this is working. I think they do experience it working before a year, but like consistently, like we’re really, we’ve really embraced that this is the place we have these conversations. We’ve really embraced that this is where the decisions get made. Because I think it’s tempting, you know, it’s tempting like, oh, well, we’re in another meeting over here. Can’t we just have that conversation? And for someone to say, actually, no, I think that’s a board agenda item. Like, that’s when, you know, they’re actually hitting their stride when they actually can stop themselves and say that’s a board meeting agenda item, not a staff meeting, or whatever kind of leadership meeting, or whatever the case might be, I would say that’s when they’ve really embraced it. Yeah, when they catch themselves and they and they find that they know to use that as a tool, as a place to put that decision
Elizabeth Ledoux: right. The idea behind that is so amazing, because the board is actually a new practice. It’s a new governance practice, and it takes time. I think. What I found is people think, oh, yeah, we’re just going to put in a board. We don’t need much of a runway. It’s going to be super simple, and we’re just going to do that with ease, right? It’s just going to be like, Oh yeah, we’ll just put that board in. And it’s really about the again, education and the behavior change that has to take place in order to get that really working. I think people underestimate that a lot.
Marcy McNeal: Yeah, they do think it’s very simple and and they might think it’s kind of not that significant. How, why is this? You know, is it really that important? We’ll do it because it’s a good practice to do. But is it really where we’re going to make our decisions? And, you know, they need to to if they really embrace it and make that behavior change is when they get to experience the full value of what it provides. And, you know, I, I can even, you know, I think of a family that I work with right now where they are tackling some really significant issues and conversations, and they are, even though it might not feel sometimes like they’re making progress. They have made so much progress, it’s like, okay, this is this agenda item is on here for the fourth month in a row. And I’m like, Well, that’s because we made a little bit of progress. Now we have the next level of progress to make. And, you know, so it, it definitely just provides that space for those bigger issue conversations that they might want to gloss over or they just push but we’ll get to that someday, and it’s like, no, today’s we’re getting to it today.
Elizabeth Ledoux: Yeah, so because we have the right decisions on it and it, it does provide a place for people who need decisions made on sometimes things that an owner typically wouldn’t want to tackle. There are so many that causes so much friction, right when one person wants it done and needs it done and sees it that it needs to and they have a high sense of urgency, and especially if it’s the owner, the owner saying, Oh no, we’re going to deal with that later. But there’s no place to talk about that, no place to actually do that. So throw it on the agenda. Let’s have a conversation. Let’s understand the why behind the owner wanting to push it right. That’s okay. Understand that, and let’s also understand, though, the reason why there’s a sense of urgency on the other side to do something. So we have transparency, and it works beautifully.
Marcy McNeal: Yep, it does. It does create the space for that level of a conversation. And you know, it doesn’t mean everybody’s going to get what they want out of it, but, you know, and maybe the decision will go the other way, but they’ve been heard. You get a chance to be heard, and the voices are all there,
Elizabeth Ledoux: yeah, which is it? Yeah, it’s, and it’s, it’s a great way to agree to disagree, right? But it’s for the better of the company, and it’s the way that we need to go. And so we move forward. And Marcy, I just want to add
Marcy McNeal: something really quickly, Elizabeth, because it’s also the better way to maintain those key, important relationships inside the family. Because you can have a meet, you can have a conversation at a board meeting, you can be board members, and you can leave the room, and you can have Sunday dinner and be mom and dad and kids and whatever the scenario is, and that conversation isn’t there. It’s not present. It lived where it did in the board meeting. So and it’s not personal in the board meeting. It’s not about I’m your I don’t agree with you. You’re bad. You made the wrong choice. It’s about these. This is what we’re. Get into for the business, and we can still have really strong, loving family relationships outside of this meeting. And that’s, I think, so important it
Elizabeth Ledoux: is, and that’s what that concept is. What goes back to the first document that you talked about, which is that board constitution, right? It’s a board constitution of what are we agreeing to, and how do we want to behave, and how do we want to act, and what’s right and what’s not okay, and you know just how what’s expected of us as a board member? Yep,
Marcy McNeal: absolutely, it’s all good stuff. It’s worth having.
Elizabeth Ledoux: So yeah, Marcy, our time goes so quickly, and we are at the end of our time here. One, I want to thank you for coming and just can’t, you know, thank you enough for taking the time to share your experience and the business governance. And two, I just would like you know, what one thing would you leave with our with our listeners that you think might be helpful for them on the topic,
Marcy McNeal: I Well, first of all, thank you for having me. I love talking about this, because this work is so fulfilling, and it’s inspiring to see families navigate the transition so powerfully. And I would say, I would say my one piece of advice or feedback for somebody who is considering a transition, you could do your board governance now. You can do it anytime. You could invite people to be on your board, even if they have no ownership, or you give them 1% ownership, or whatever it is. But it’s never too soon to put board governance in place that’s going to support the important decisions that need to happen as you grow your business and eventually transition your business. It’s just, it’s a great practice. It’s a great practice, and it takes time, so no time like the present.
Elizabeth Ledoux: That is awesome. That is such great advice. And you know it I It even made me think about multi generational type things and even inviting people on to learn and grow when they’re not when they don’t even have a vote. You can do that too. So what great advice. Marcy, thank you so much. All right, thank you. Elizabeth, yeah, you be well and again. Thanks for all of your thoughts and contribution today.
Marcy McNeal: Absolutely, it was fun.
Elizabeth Ledoux: Thank you for listening to this episode of the Business Rransition Roadmap. If you are listening to this and you find yourself wanting to go deeper into these topics and start the process of putting together your transition strategy, I’d love to offer you a free initial strategy session with my team where we’ll help you to explore the future transition of your business. Head over to www.transitionstrategists.com to schedule a call. Thank you again for listening, and I’ll see you on the next episode of the Business Rransition Roadmap. You.
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The Business Transition Roadmap with Elizabeth Ledoux
How do communities thrive? When businesses experience healthy growth and transition. Join CEO of The Transition Strategists, Elizabeth Ledoux as she and her guests identify what makes a successful business transition roadmap. If you know you want to transition or exit your business “one day”, today is the right day to start planning. This show will give you the roadmap.
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