The Role of Modern Advisory Boards in Family Businesses – An Interview with Rainer E. Ulrich, Managing Partner of SEViX

SEViX: Mr. Ulrich, what do you believe are the primary reasons for the growing importance of advisory boards in mid-sized family businesses over recent years?

Rainer E. Ulrich: Today’s market demands are more dynamic and complex than ever before. Family businesses face dual challenges: on one hand, the pressures of digital transformation and sustainability, and on the other, the intensifying competition from international markets. These developments call for strategic expertise that often extends beyond the traditional executive experience. A well-structured, independent advisory board offers valuable support by introducing external insights and preparing the company for market changes and opportunities, ensuring strategic positioning.

SEViX: You mention the added value of a professional advisory board. What specific advantages does this bring to a company’s long-term competitiveness?

Ulrich: The greatest benefits are strategic stability and resilience. Research, like that from the IfM in 2022, shows that companies with professional advisory boards are more resilient during crises. An advisory board acts as a consultative bridge between management and family ownership, enabling consistent strategic reflection. It identifies early warning signs of potential crises and ensures that informed, timely decisions are made. By enhancing resilience, a well-qualified advisory board also boosts innovation and enables the company to seize new market opportunities.

SEViX: It’s common to see advisory board positions in family businesses filled informally. What risks does this practice pose, and why is professional recruitment essential?

Ulrich: Informal appointments, such as through long-time friends or close business associates, can compromise the objectivity and strategic foresight of an advisory board. In disruptive times, companies need independent, strategically experienced voices who can evaluate the market neutrally and have the courage to address difficult truths. A professionally appointed board establishes clear roles and responsibilities, enabling constructive and critical support for the executive team, which is essential for the company’s long-term success.

SEViX: You’ve highlighted the importance of strategic expertise. What are the core responsibilities of a modern advisory board in this area?

Ulrich: Strategic guidance is at the heart of any advisory board’s work. Unlike the operational focus of management, an advisory board operates from a high-level perspective, concentrating on the company’s long-term direction. This includes proactive crisis management, strategic decision-making in areas such as digitalization and sustainability, and fostering innovation. In an increasingly volatile market environment, it’s crucial for the advisory board to support management with a clear focus on the company’s future readiness, identifying promising new business areas.

SEViX: What role do diversity and independence play on an advisory board, especially during challenging times?

Ulrich: Diversity and independence are indeed critical success factors. Diverse perspectives encourage innovation and prevent insular thinking. An independent board brings objective viewpoints, often derived from a certain distance from ownership and management. This objectivity is particularly valuable when making critical decisions or navigating conflicts. External members, who act strategically and neutrally, enhance the company’s flexibility and agility in responding to market changes.

SEViX: You refer to the “new type of manager” on the board. What distinguishes this individual, and why is this role essential for family businesses?

Ulrich: The “new manager type” on an advisory board combines deep technical knowledge with strong interpersonal and communication skills. Family businesses often face the challenge of balancing diverse interests within the ownership and management. This is where an advisory board member who not only thinks independently and strategically, but also possesses moderation skills, becomes invaluable, helping to navigate potential conflicts constructively. This type of leader can guide the company through transformational processes, bringing valuable external insights that foster innovations essential for long-term stability.

In our bestseller, "Managing Corporate Crises for Success – Strategic Business Transformation as the Ultimate Discipline," we delve into the topic "New Requirements for the Advisory Board" on pages 356 and beyond.

SEViX: What can SEViX contribute in terms of professionalizing and strategically positioning advisory boards in family businesses?

Ulrich: SEViX brings comprehensive expertise to the professionalization of advisory boards. Our partners deeply understand the unique needs of family businesses and have extensive experience with the intricacies of this business model. We assist in selecting and structuring an advisory board that will provide optimal support to the company. For family businesses, the key question is: “What does our future-proof business model look like, and what skills do we need to realize this vision?” A professional advisory board plays a pivotal role in developing clear diversification strategies, identifying new market opportunities, and future-proofing the company.

SEViX: In closing, what advice would you offer family businesses considering the establishment of an advisory board?

Ulrich: First, owners and management should align on the objectives and added value of an advisory board, committing fully to this change. A well-appointed advisory board is an investment in the company’s future. Businesses should avoid compromises in selecting board members, instead choosing experienced, independent experts who will serve as strategic partners and provide continuous support. With a qualified advisory board, a company is well-prepared for upcoming challenges and positioned to thrive with long-term success and stability.