Board structure is a deliberate choice that can meaningfully shape the path of any private equity portfolio company. While most PE boards include seasoned operators, industry specialists, and financial leaders, introducing family members—especially in legacy businesses that have recently taken on PE backing—creates an additional layer of complexity.
So what unfolds when family members take seats on the board of a private equity-backed company? The answer sits at the intersection of heritage, governance, influence, and transformation.
Why Family Members Often Remain Involved
When a PE firm invests in or acquires a family-run organization, it’s not unusual for relatives of the founders to retain board seats. Their continued presence can serve several strategic purposes:
Institutional Knowledge: Family members often hold decades of organizational insight—deep familiarity with the company’s history, clients, and culture that can guide major decisions.
Continuity and Trust: Their involvement can steady relationships with employees, vendors, and customers during the ownership transition. A familiar face on the board often reassures key stakeholders that the company’s values won’t vanish overnight.
Alignment with the Founding Vision: When PE firms hold a minority position, family board members can act as guardians of the founder’s intent, ensuring growth doesn’t come at the expense of identity.
Active Owner-Operators: In some cases, family members continue to run parts of the business day-to-day. Their board participation reflects both their operational role and their ownership stake.
The Tensions That Can Arise
Keeping family members involved also brings distinct challenges.
Potential for Misalignment: Private equity boards typically emphasize performance, scale, and ROI. Family members may emphasize loyalty, heritage, or long-standing relationships—priorities that sometimes conflict with investor goals.
Governance Hurdles: Effective boards rely on objectivity and data-driven decisions. Emotional ties and informal influence can blur these boundaries, slowing progress or complicating accountability.
Professionalization Pressure: PE firms often aim to transition family businesses toward more formal, scalable management models. Depending on their openness to modernization, family directors can either enable or obstruct that evolution.
What This Means for the CHRO in Private Equity
Family representation on a PE board introduces a different kind of complexity—where emotion, history, and relationship dynamics coexist with performance metrics. Here are the key challenges a PE-focused CHRO is likely to face:
1. Balancing Modernization with Legacy
The Challenge:
The CHRO’s mandate often includes introducing structure—HR systems, leadership frameworks, performance metrics. Family board members may see these efforts as eroding the company’s legacy.
Example:
A CHRO attempts to replace long-tenured managers who are underperforming, but faces pushback from the board, which values loyalty and history over performance data.
2. Emotion vs. Evidence in Decision-Making
The Challenge:
Board members with family ties may rely on sentiment or personal relationships instead of analytics. This can undercut data-driven initiatives around performance management or compensation.
Example:
A CHRO recommends KPI-based executive bonuses, but the family board rejects it, fearing it undermines long-standing informal recognition traditions.
3. Hesitation Toward External Talent
The Challenge:
When tasked with elevating the leadership bench, CHROs may find family members reluctant to hire “outsiders.” This hesitancy can stall growth and limit the injection of new expertise.
Example:
A CHRO seeks to hire a proven CFO, but faces quiet resistance from board members who favor promoting a family-connected internal candidate instead.
4. Gray Areas in Governance
The Challenge:
Some family directors blur boundaries, exercising influence beyond formal channels. This can create confusion, bypass leadership hierarchy, and weaken HR authority.
Example:
A board member directly contacts a department head to overturn a disciplinary action—undermining both the CHRO and the company’s governance protocols.
The Real Takeaway
Board composition isn’t something you can control. What you can control is your reaction to it. Stay focused on your sphere of influence—your communication, composure, and consistency. Approach board dynamics with empathy and awareness, offer insight without defensiveness, and maintain alignment with long-term goals. In the end, how you navigate these complexities often matters more than the complexities themselves.
