Why Business Governance Is the Learning Platform Your Successor Actually Needs

Have you ever wondered how business owners who’ve done everything themselves are supposed to hand over decision-making to the next generation — without it all falling apart? 

In this solo episode, Elizabeth Ledoux takes a deep dive into business governance and why it’s not the obstacle most owners assume it is. She walks through the three levels of decision-making in any business (CEO/job level, board level, and shareholder level), explains why most small business owners have them all smashed together, and shares how pulling them apart creates a real learning platform for successors. Elizabeth also introduces two practical tools — the board constitution and decision levels — that she’s used with clients for years to transfer authority gradually, build trust, and set up businesses to thrive beyond their founders. 

Key takeaways from this episode: 

• Most small business owners resist governance because they associate it with losing autonomy — but it’s actually the structure that makes successful transitions possible. 

• Three levels of business decision-making exist in every company: job/CEO level, board level, and shareholder level. In small businesses, these are usually collapsed into one person. 

• The board is a learning platform — it gives successors a structured space to develop judgment, debate ideas, and earn trust before taking full authority. 

• A board constitution defines how the board operates: who’s on it, how often you meet, what’s expected, and how you remove someone. It can be as structured or flexible as you need. 

• Decision levels act as “brakes and gas” — you can move authority between the board and the CEO role gradually, giving successors more autonomy as trust grows. 
• Building a functioning board takes 1–2 years of practice, cadence, and learning — and it’s worth every bit of that investment. 

Chapters in this episode:

01:00 — Introduction & What We’re Covering Today 
02:30 — The Challenge: Why Owners Resist Governance 
04:45 — Three Levels of Decision-Making (CEO, Board, Shareholder) 
09:00 — Why Most Small Businesses Have It All Smashed Together 
11:30 — The Board as a Learning Platform (Highway Metaphor) 
15:00 — How Long It Really Takes to Build a Functioning Board 
17:00 — Tool #1: The Board Constitution 
19:30 — Tool #2: Decision Levels (Brakes and Gas) 
22:00 — Is This Really Needed for a Small Business? 
24:00 — The Evolve Program & Closing Thoughts 

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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Our Sister Show: Your Next Gen Friend 
Hosted by Andrea Carpenter, Your Next Gen Friend is for the next generation stepping into leadership in family and private businesses. If you’re a successor figuring out your path, this show is for you. 

Website: https://yournextgenfriend.com/ 
Instagram: https://www.instagram.com/yournextgenfriend/ 
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Andrea on LinkedIn: https://www.linkedin.com/in/andreakcarpenter/ 
Spotify: https://yournextgenfriend.com/open-spotify 
Apple Podcasts: https://yournextgenfriend.com/apple-podcast 

Get Elizabeth Ledoux and Laura Chiesman’s latest book, “It’s A Journey: The MUST-HAVE Roadmap to Successful Succession Planning”: https://amzn.to/3oq2LQv

Why Business Governance Is the Learning Platform Your Successor Actually Needs Transcript

Elizabeth Ledoux:
Hi everybody and welcome back to the Business Transition Roadmap. I’m Elizabeth Ledoux and today what I’m going to do is a solo podcast for you. We’re going to do a nice deep dive into the concept of decision making and the idea of business governance. So today what we’re going to talk about is one is the challenge.

What do business owners think about when they think about business governance? What’s the challenge for business owners and even successors? ⁓ We’re to talk about a learning platform and how this is a learning platform and what that looks like. Then we’re going to go into two tools that actually are, they are so significant and so helpful when you’re going through a transition process.

So we’re going to talk about those two tools and you know those two tools are their lifetime tools that you can use for years and years, multi-generational type things. So just really wonderful tools that we’ll talk about. And then as we wrap up, just a quick thought on, you know, is this really needed? Is this really too much? Is it over the top? Because you know, we’re just a tiny business. We’re just small.

and this isn’t really maybe needed by us. So we’ll talk a little bit about that and then we’ll wrap up.

So to open, ⁓ when we talk about business governance, it’s very interesting. So over the 30 years that I’ve been doing this, I’ve seen so many instances of what I would call business governance and helped families and businesses go through the shift from generation one. So how does generation one we’ll call it?

How are you currently making decisions? And what does it need to look like for that next successor coming in? How does that work?

When I talk to people, what I find is that their initial response is kind of a heartfelt challenge. Things like, gosh, you know, it’ll take us forever to make a decision. We’re a small business. We have to move quickly. And other challenges like, I don’t even know how I make these decisions. And so how…

Could I start to include somebody else? just the challenge of the loss of autonomy, it’s a big deal. That loss of just being able to go home, think about it for a couple nights, come back, and it’s like, hey, this is the direction we’re going, and this is what we’re going to do. And so the challenges that I see are people really resisting this governance idea because they like

their autonomy and the way that they’ve been doing it.

The shift in thinking or the shift in mindset is that without this governance, you actually are unable in a way to teach that level of ⁓ knowledge for the transition. So let’s talk a minute about roles. ⁓ When you think about your, let’s say you’re an owner and you’ve been doing this for 10 years and.

when you make a decision, you just make it. It’s just like, yep, there’s a way we’re going. This is how it’s going to work. So when you start to think about the what decision types you’re making, questions are, are you making a decision as a CEO, potentially in a job function? So is this a normal decision that maybe you would like if you were hiring a CEO?

that you would think a normal CEO would make. So maybe it’s a day-to-day decision, ⁓ you know, operationally, could be hiring somebody, could be ⁓ whether or not you’re going to promote somebody, it could be just a day-to-day operational decision on ⁓ customers or customer service or processes or procedures or sales. All of those things.

are day-to-day type operational items. And so as maybe a CEO, you would make those choices and those decisions. Up to and including potentially as a CEO, you might create a strategy forward, ⁓ maybe short-term strategy forward, could be long-term, for sure short-term. And likely you’re putting together and overseeing a budget. ⁓

making sure that the budget is being followed on a day-to-day basis. So that would be that CEO job role. The second level of decision-making would actually be the concept of a board of directors. And most small businesses don’t separate any of these that I’m talking about. So let’s dive into the second one, and there are three. The second one is that board of directors level.

So remember, the board of directors, their job is to oversee the business, make sure that it’s healthy and functioning properly, and to make money for their investors, make money for those shareholders.

So as a board member, sometimes you’re helping that CEO and supporting and mentoring them. ⁓ Sometimes you as a board member or as a board, a collective board, you would be approving the direction of the company. You might have significant input into the strategy of where you’re going to go. for instance, one of our clients right now is trying to

maybe go into some other states. It’s going to be a pretty sizable investment. ⁓ Also some sizable risk. So do you want to leave that in your CEO’s ⁓ arena, I’ll say, to make that decision? Or do you want some other input? Because it’s going to require potentially a significant investment to move into another state and open up an entirely new office. So risk investment.

at a certain level, you want that going to the board. So that would be an example of the board level type decisions. Yeah, going into debt would be another one. Are you going to go into debt? If so, how much? And then the third would be even higher. And that is the owner, the member, if you’re an LLC, or it’s the shareholder. So

At that level, if you think about what types of decisions get made there, the types of decisions that get made there are things that would significantly impact those investors. And they’re things that typically would be in a shareholder agreement. So for instance, ⁓ the sale of the entire company likely would go into the shareholder vote.

So that would be a decision that’s made at that shareholder level. ⁓ Other things like, are you going to add partners? Are you going to add additional investors? If you do, it dilutes the other investors. So that would be material for the investor group to know, do we want to add other investors? Are we willing to issue more shares? ⁓

Do some of our shares become voting or non-voting? Those kinds of decisions happen at that share level, that shareholder level, up to and including things like purchase or buyout of an investor. So as you walk through the shareholder agreement, which many independently owned single owner small businesses don’t have a shareholder agreement,

As you go through a transition, likely you’re going to have multiple owners and likely you would then have a shareholder agreement. And these are all decisions that need to be made. So what I’m talking about is the structure. So as you walk through this, what you’re doing in this decision making and this governance is you’re pulling apart the three different levels because

Remember, usually in a small business, they’re smashed together. So you’re pulling apart those three different levels and you’re saying, as an owner, I’m going to start to let a CEO or a leader make some of those decisions. I’m not going to let go of the direction of the business and the investment as far as.

know, debt and that kind of thing. I’m going to maintain my board seats, so I’m going to keep doing that. And for sure, while you’re owning it and going through this transition, you’re going to have a shareholder vote or an owner vote.

as you start to pull those things apart, what happens is you start to have opportunity. So instead of, go back to the challenges, most owners don’t want governance because they see it as cumbersome. They see it as, gosh, putting handcuffs on you ⁓ or even handcuffs on your next successor because it’s like, well, I don’t want the handcuffs, so I’m not going to.

put that on my successor because I don’t want them to have the handcuffs either.

So as you start to think about pulling apart these different decision levels when you’re really used to doing them all, one, it takes a little bit of knowledge, a little bit of reflection to go, oh yeah, I’m not supposed to do that. And as you start to pull it apart, you start to see the opportunities. And there are lots and lots of opportunities in doing this.

a cumbersome kind of a thing. It seems like a lot of work, but it saves so much time, so much energy, and a lot of, there is so much opportunity for conflict if you do not do it. People believe that there’s more conflict in doing it. Again.

⁓ like putting handcuffs on yourself so you won’t be able to make the decisions all by yourself, ⁓ and also potentially doing the same to your successor. However, you really don’t want that successor to just be making decisions and turn over the entire company to them all at one time. This board opportunity is a learning platform. It’s a place where

I kind of think, and you might in my other podcasts have heard this, ⁓ if you think that, you like you’re going down the highway and you’re going 70 miles an hour down this highway, and what you’re going to do is you’re going to bring a transition on. So they’re going to come up this on ramp and they’re going to have to get up to speed. And you might have to slow down a little bit so that they can get up to speed with you. But pretty soon.

you’re both gonna be going 70 miles an hour together. Ooh, that feels pretty good because you’re all in sync, everything’s going, and you’re making decisions together. They, in the decision-making process, you all are agreeing. So not only maybe at a job level are you in alignment and having, you know, not perfect conversations, but maybe challenging conversations where you come to like, yeah.

That makes sense, right? They come a little your way, you come a little their way. It’s like, yeah, we’ve got alignment. Let’s go ahead with that. That sounds perfect. So you’re moving along this highway at 70 miles an hour together. And then at some point, when you gain enough trust and you see them making a decision that’s in alignment with the shareholders doing well.

It’s in alignment with the direction of the company that the board has approved and wants. And it’s in alignment with everything. So you’ve gained that trust. Then what you have the opportunity to do is you go off on the off ramp. So as a transition, you’re like, you know what? This is going really well. I’m going to get off this highway. I don’t have to be in the day to day anymore.

And at some point in time, you might even get farther off the highway by saying, you know, I don’t even need to be on the board anymore. And at that point, maybe you’re transitioning your final transaction. Maybe you’re giving up majority ownership, but why? This is huge. The reason why you’re giving it up is because your successor is ready.

And not only your successor, but it could be a successor group. There are many, many, many instances where you’ve got more than one child coming in. We’ve got some that have children and employees that are mixed. So we’ve got both coming in as owners. And then we’ve got, you know, groups of own of employees coming in, some that have chosen and been invited to buy into the company. So.

There are many, mixtures, but the idea is that these successors, whether there’s one or more, whether they’re family or employees or a mix, that they’re ready. And you’ve heard it before if you’ve listened to me and follow me. It’s my belief that the reason why the statistics are so bad for businesses succeeding in even a first transition, first generation transition.

is because those successors, they’re not ready. They’re not ready.

So this is a learning platform. On the board, I’ve had many, owners say, I would never, I would never bring on these people, these successors to be on the board and run the business. Never do it. And it’s interesting because, you know, I’ll agree with them. These candidates, these new potential business

board members, they’re not ready to be on the board when you bring them on. They are so much, they are so green. They’re so needing to learn. And what happens as you start to pull apart these decision levels, you need to help them and also help yourself understand the job level decisions, the board level decisions. Those are the two big ones. And if you don’t have a board meeting,

set aside, abhorred time, set aside. What happens is you just keep making all of the decisions together. So you think you’re helping them by making the decisions, but you’re not segmenting them. So the decisions are just being made. And there’s no time set aside to talk about things that are not day-to-day. There’s no time when you sit down with just that group of people and talk about

investment and talk about ⁓ risk and talk about some of the things that should be at the board level. So this is a learning platform initially so that they can come on to this highway with you and you can get them up to speed. That’s what this is initially for. Once they’re up to speed then this board is moving, it’s going, and it’s working.

Sometimes people ask me how long does it take to get a board off the ground? It doesn’t take that long to functionally get it off the ground. ⁓ What takes a long time is the practice and the learning. It is a high learning curve. So in my experience, ⁓ owners that do it right.

Probably the first year is all about just getting the behavior right, getting your agenda right, really settling in on it, having a cadence. In a year, a board goes through a cycle. In a year, you’re going to be doing strategy work. You’re going to be looking at financials, hopefully every single meeting. Could be monthly at the beginning because learning curve is high. So frequency should be high.

And then as you move forward, so yeah, that year is just getting this thing off the ground, getting the behavior, getting the cadence, getting everybody familiar with how to read those financials and what you’re looking for and all of that kind of thing. And then in year two, ⁓ you really solidify it. So if you were gonna build a board, a really functioning board with people who actually know what they’re doing,

You’re going to give yourself at least a year to two years to get that really working so it feels good. Again, going into that journey concept.

At the beginning of the podcast, told you we were going to talk about two tools, two things that make a huge difference in how this comes together. ⁓ The first one is what we call the board constitution. It’s how does this thing work? And ⁓ I love the idea of a constitution. Is it OK? And I sometimes think of the US Constitution or other constitutions that are out there.

They’re just the boundaries. It’s how you do it, how you live by this board. And the cool thing about it is you can make the board with your board constitution as structured as you want, or you can make it as open as you want. However, you have a board constitution. So when you invite these new members onto the board, there’s some kind of a structure.

And it’s really cool if they can help you design the board. That’s a learning opportunity in itself. So as they come in, ⁓ we want that board constitution to be available, whether you design it or you design it together. And the board constitution has, you know, what does it mean to be a board member? What are the expected responsibilities and behavior? How often are you going to meet? Who can be on the board? ⁓

Is it only family members? Is it only non-family members? ⁓ Is it employees? Are they all owners? Are they not all owners? And that type of thing. You decide how many people are going to be on that board. ⁓ Don’t have to elect all of them, but you can elect them if you choose to. You decide how do you get somebody off the board. As important as it is to bring them on, how do you get them off? What are the behaviors that are expected?

And what are you going to do all year? You know, when are you going to expect to look at your strategic plan? When is that financial plan going to be done? And this is going back to the challenge where people start to feel like this, ugh, it’s going to be so hard because there are so many things that we have to do. However, the structure is what gives those successors and also you the opportunity to have trust and to have the ability to grow together.

So the board constitution is one of the tools that is awesome. Then there’s another tool called decision levels that we’ve used for years. And decision levels, I think of it as the brakes and the gas. So let’s say there are three different decision levels. One is the shareholders. So what decisions do the shareholders make? And typically, that’s in the shareholder agreement. So those are easy to get.

Then there are certain decisions that get made at the board level and the job level. And the job level, you can think of it as the CEO, because the CEO is hired by the board. So the CEO actually reports to some buddy or a group of people. It’s not a free for all, like maybe you’ve had as an owner founder. ⁓

there is a little bit of a boundary there. So this CEO reports to the board, is hired by the board, and the board gets to decide, or the shareholders, depending on how you structure it, what decisions have to be made at the board level, and then what decisions get to be made at the job level. And if you think about that, the board level and the job level, ⁓ you can either, let’s say that you’re moving out of that job level role,

you can take some of that decision-making authority and put it onto the board because you’re going to be on the board and you’re happy there so you can oversee that. So could be money, know, a decision over a certain amount, ⁓ could be a variety of things. So you can move those decisions, the level, up onto the board and then as that CEO and that team, their leadership team gets

really good and you start to trust them. So you’re running along the highway together, everything’s going great. You start basically giving them a little bit more gas. You move their decision making level higher. So not as many things have to come to the board. And so I’m hoping that you can see that with that dynamic, you can move authority slowly instead of like letting go. Yeah, go for it. Here you go. It’s all yours.

That is kind of a disaster waiting to happen. But instead, it’s like, yeah, let’s get used to this. Let’s all get comfortable. Because their learning curve is high, and they’re uncomfortable too. They don’t want to make a mistake.

So I know our time goes fast and I want to wrap this up. This may seem like it’s over the top and it may seem like it’s a lot of work and it’s very intentional to get it set up, but it doesn’t take that much time really. ⁓ you focus on it and you do it, it does not take that much time.

It has so many benefits and so much value, not only in teaching and training and mentoring, it also has value in giving your successor structure. And it gives you the opportunity to gain trust, transfer knowledge, and keep a place where you can debate. The culture in the board is debating, learning, growing.

bringing those opposite opinions and understanding which one or a blend, which one is going to be the best way. So that’s the purpose in the platform. It’s very, very valuable. And if you’re interested, ⁓ as you all know, this is a passion for me to make sure that these businesses go forward well and they thrive forward without you, the transition or without the owner founder.

It’s important to our country and important to our economy. So if you’re interested in the board and you want to know more about it, I just encourage you to take a look at our Evolve program because the implementation side of our Evolve program has all these tools and our guides walk you through that with ease. They’ll help you all the way through. So anyway, thanks for listening today. Board governance and decision making, pay attention to it and make it intentional.

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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.

If you’ve enjoyed this podcast, you can check out other episodes here: Podcasts – The Transition Strategists