For a family business to operate effectively, it must have an effective board of directors, especially if it is to continue from one generation to the next. Because of the frequent blurring of family, ownership and management in a family business, the proper function of a board of directors is sometimes ignored.
An effective board of directors has been identified as one of the most important factors in determining whether a family business will continue from one generation to the next. Joe Astrachan, a nationally known expert on family business issues, has been a guest speaker at a number of programs for the Family Business Alliance. His research has identified three key factors for success in transition of a family business to the next generation: a functioning board of directors, a strategic plan for the business and some form of family meetings. Oddly, his research also indicates that having a formal succession plan does not correlate with actual success in transitioning the business to the next generation.