Strengthening family businesses for the next generation
Family businesses don’t struggle because they lack commitment. They struggle because commitment, legacy and identity sit at the same table as decision making.
When ownership, management and family relationships intersect, governance is never just governance. It is trust, history and the future of the family all at once.
This is why conversations about boards, independence and governance often arrive later than they should. Not because families don’t value structure, but because they value continuity, cohesion and control. I was reminded of this this week when attending the Australian Institute of Company Directors' latest briefing.
Yet families who transition successfully across generations rarely do so by chance. They do so by becoming more intentional about how decisions are made, who participates in them and how the next generation is prepared to lead.
Independence does not dilute control, it strengthens it
One of the most persistent myths we encounter is that independent voices weaken family control. In practice, the opposite is often true.
Independence strengthens decision making by reducing blind spots, improving oversight and introducing discipline around strategy, risk and performance. It shifts decision making from reactive to considered.
This does not mean independence is a silver bullet. It works when it is designed well, recruited well and aligned with family values and long-term intent. Governance is more than a board
In family enterprises, governance operates across four interdependent layers:
management running the business day to day
board governance providing oversight and challenge
ownership governance shaping major decisions and succession
the family system itself.
Decisions at board level can’t be separated from family relationships, ownership expectations and future transitions. Governance in family businesses is never purely structural. It is relational, cultural and strategic. And it is not for everyone and may take on a different approach as was the case for Albert’s when transitioning to an independent Board as shared by CEO David Albert this week.
At Sparrowly Group, our board facilitation work recognises this interdependence. We are not simply helping organisations design governance structures; we support families to align decision making with long-term continuity.
From hindsight to foresight
Many boards spend most of their time reviewing the past - financials, compliance and performance.
Effective governance shifts time toward foresight - strategy, risk, succession and future capability.
This shift is increasingly important as businesses navigate:
workforce transformation and skills shortages
cyber risk and technology disruption
climate, regulatory and stakeholder expectations
capital allocation and growth decisions.
These pressures require broader governance capability than many founder-led boards historically needed. Independence is less about industry expertise and more about strengthening strategic capacity.
Succession is not an event, it is a capability
Succession is often framed as a moment - the day leadership transitions.
In reality, succession is a multi-year process of preparing the business, the family and the next generation.
Independent directors often support this transition by mentoring emerging leaders, strengthening leadership confidence and acting as trusted intermediaries between generations.
As families grow, independence can also help balance the dynamics between active owners working in the business and passive owners who are not, improving transparency and trust.
Governance strengthens continuity and exit readiness
Governance is not only relevant for multi-generational continuity. Families considering a future sale or partial exit often discover that formal governance reduces reliance on founders and strengthens business resilience.
Put simply, governance reduces key-person risk - a factor that influences valuation, investor confidence and long-term sustainability.
Starting small is not starting late
Governance does not need to arrive fully formed.
Private and family enterprises have a unique advantage - they can test, iterate and evolve governance over time. And it looks different for everyone, and that is ok.
For some families, this begins with an advisory board. For others, it may involve introducing one independent director. What matters is beginning the conversation and building comfort progressively.
Clarity enables confidence
Governance works best when decision rights and responsibilities are clear. Board charters, reserved matters and escalation pathways reduce ambiguity and prevent conflict.
This clarity allows boards to focus on strategic value rather than operational friction.
The human dimension matters most
The most effective independent directors bring more than technical expertise. They bring emotional intelligence and courage.
They understand nuance. They facilitate difficult conversations respectfully. They recognise formal and informal dynamics within families. They know when to challenge and when to listen.
Independence also removes some of the burden from family members who might otherwise be responsible for delivering difficult feedback. Constructive challenge becomes part of governance rather than a personal confrontation. It’s important to remember governance in family businesses is not transactional. It is relational.
Facilitating alignment for the long term
At Sparrowly Group, we work alongside family enterprises to facilitate strategic conversations, support succession planning and leadership development and align strategic direction across the generations.
Because continuity is not achieved by holding on to control. It is achieved by strengthening the systems, relationships and leadership that carry the business forward. And that begins with a conversation.
