Executive Interview Series: Mairi Mickel, Family Business Advisor
As part of Carlyle’s Executive Interview Series, James Colhoun (Head of Board Practice, Carlyle) met with Mairi Mickel (Family Business Advisor) to discuss the role of the non-executive director in family businesses.
Are there any specific events that lend themselves to the appointment of a non-executive director within a family business?
Non-executives can play a critical role in modernising and professionalising governance and decision making in family businesses. A non-executive should bring an unconflicted and objective perspective that many family members do not, or cannot, have. Family members may exhibit a tendency to act in the best interests of the family (or themselves), and such an approach may not necessarily always be in the best interests of the business.
For example, in a situation where a family director is the largest shareholder, a reasonable question to pose is whether that person is truly independent when it comes to representing the business and other shareholders. Non-executives can create forums and policies that allow for representation of both families and their businesses.
Additionally, succession, sale, IPO or any change in ownership, strategy or leadership are inflexion points that lend themselves well to such appointments. A non-executive director has a duty to engage with the ownership base, and especially the next generation. I’ve seen non-executives appointed to help ask the “sticky baton” question of “when is Mum or Dad going?”, so orderly succession planning can occur. Conversations in family businesses that are emotionally charged tend to be left too late. A non-executive director can start these conversations (from both sides of the fence) early and unemotionally, building a bridge between the generations. That being said, non-executives have to be wary of aligning themselves too closely to any one family member or shareholding group: just as in a quoted company, the board should equally represent all institutional shareholders.
What are some of the skills and characteristics you feel are important in a non-executive role?
There are many, it is a highly nuanced role with a lot of moving parts. Facilitation and diplomacy are critical; individuals in this role must possess these skills, especially with regards to dealing with large and potentially disenfranchised shareholder bases. They must also be a first-class mediator, with high levels of emotional intelligence and empathy, and yet be able to distance themselves at times in order to act in a pragmatic and objective manner. It is not an easy balance.
There are a number of issues family businesses face that are more emotionally charged than in other ownership classes, such as remuneration; removing a family director; changes in governance and constitution; or a significant shift in strategy. Family business leaders are often charismatic and strong willed, and perhaps not used to being challenged; however, a good non-executive must offer constructive challenge, do the right thing and be prepared to ask the difficult questions and handle incongruous moments artfully. As a specific example, I worked with an non-executive director in one family business where the CEO was moving into a Chair role, but still wanted to exert influence on his son, who was moving to be CEO. This naturally caused the son some concern, and the non-executive was able to act as a lightning conductor between the two.
I think talent spotting and talent development are really important skill-sets in this role. The “next generation” are too often left to their own devices, not sufficiently nurtured or set up to fail with either too much or too little power given. I have seen a non-executive director actively encourage a next generation member to seek a role in a competitor business, and then come back to the family business. This individual returned to the family business with a significantly expanded frame of reference and a broader commercial mindset. This has been highly constructive for both the individual and the firm.
The coaching and mentoring aspect of the role also extends to departing senior family members. How can you help prepare them for life beyond the business, and (critically) how do you get the business ready for this type of transition? A good non-executive director will constantly be thinking about the direction of travel and what needs to be done. It is important that such individuals are able to ensure ethics and values are transferred from one generation to the next and watch out for the “change mongers” who, if left to their own devices, could quickly erode years of hard work, damaging values, brand and employee engagement.
Gaining traction in a family business will be predicated on trust as much as innate competence, and therefore a non-executive director needs to be consistent, constant, apolitical (but a good diplomat), empathetic, honest, a good listener and intuitively know what is important to change and what cannot be changed. You need to leave your ego, but not your confidence, at the door. It is not the sort of role where you come in to learn new skills, as you are to a certain extent the teacher.
Do non-executive directors require prior experience in a family business?
Not necessarily – it very much depends on the person and the specific challenges. If you come from a quoted business it is likely you will know what good governance, shareholder representation, reporting and controls look like, and this is valuable. If, however, you are facing a situation where alignment amongst a family shareholder base is required, then muscle memory can be very important. If you are coming into a family business that is in crisis or at a critical inflexion point, then to have not faced this before and deal with it artfully would be a major ask.
It is true that, historically, family businesses have hired former lawyers and accountants as trusted advisors. I see this model shifting, with family businesses now requiring broader business skills. If a business is seeking to grow, innovate or diversify, then having a non-executive who has been through this process as either a previous CEO or Chair would be highly advantageous.
What represents sensible due diligence when assessing whether to accept a non-executive role in a family business?
I would advise that you ask for as much information as possible. Ask for board and financial packs. Ask to see the shareholders’ agreement and the family constitution – is it an effective one? Enquire about committees and advisors. If you pick up on any tension between governance and management approaches, that is a big red flag. If, for example, you have a CEO who has been in place for years and is still working a six-day week, how much of a risk is that, and where is innovation coming through?
A well governed business will have clearly set out the roles of family directors and independent directors, and the interaction between the two. It is important for someone coming in to have a proper handle on how decisions are actually made.
One piece of advice I always give is to spend time with PAs within a business; they invariably have the best insight into what really goes on. Ask about director’s loan accounts and terms for repayment (often overlooked and really important), and make sure to have robust director’s liability cover.
What would you say are the positives of holding a non-executive role within a family business?
There are many! Typically, family businesses are able to make decisions quickly. That agility of decision making is very refreshing compared to other ownership classes. Compared to PE or plc, there is a relative lack of scrutiny, public opprobrium and reporting. Families businesses invariably have strong and enduring brands, which they cherish and are proud of. This can create a positive and inclusive culture across all levels of the business: people want to work there and often stay for a long time, past their initial appointment terms. The KPIs in family businesses are typically more community and purpose focussed than in other ownership classes. Paradoxically, family businesses, although able to make decisions quickly, normally take a long-term view, as they seek to build and maintain enduring and sustainable businesses. They are masters of their own destiny, and this makes them secure, substantive and mission-led places to work.
Carlyle are fortunate to have worked with some of Scotland’s most established and iconic family businesses, as well as those at earlier stages in their journey.
Candidates are increasingly drawn towards businesses with a truly defined and lived sense of purpose. Against this backdrop family businesses are in a position of strength when it comes to attracting senior external talent. There are many candidates with the innate competence and commercial credentials required, but the defining factor is identifying those with the right cultural DNA and sophistication that enables them to gain traction and trust within such an ownership class.
About Mairi Mickel
Mairi is a Family Business advisor and has founded her own consultancy specialising in succession planning with UK multi-generational business families. She is a previous main Board director and 4th generation owner of Mactaggart & Mickel Group. She also holds a portfolio of independent NXD director roles with privately owned businesses and charities in the UK and USA. She is a faculty member of the Family Firm Institute (FFI) and delivers Family Business Governance & Next Generation Development courses with the IOD Scotland.
Carlyle is an advisory Search firm that undertakes executive and non-executive mandates across the UK. In addition to Executive Search, Carlyle operate dedicated senior Interim and Board practices, which focus on identifying and attracting the best non-permanent talent for senior executive and advisory roles.