Why Families Should Compensate Their Family Council Chairs

Many family councils are struggling to address the challenges they’re facing. Many feel pulled between competing agendas—managing all the short-term and long-term work of the family council.

For a family council, short-term work includes planning events like retreats for the family and the annual family council meeting.

But long-term projects are equally important and often get pushed to the side when the family council is faced with the immediate need to find a venue for an important meeting happening next month. Long-term agendas require thinking strategically about where your family needs to go, how you’re going to develop the next generation, and how you’re going to manage the succession of the board and other leadership positions.

Often a family will get good at the short-term immediate agenda, but they never have time to address that longer-term issue.

The dangers of under-investing in the family
There are a couple of reasons why this is difficult for families. First of all, not having long-term strategic conversations built into each year’s agenda makes it difficult to make it a priority.

But the biggest problem is that family businesses often under-invest in their families. They’re not investing as much in the family as they do in the board.

A common mistake is not paying somebody to oversee the agenda. If the family council chair is squeezing in unpaid work for the family council around other commitments, he or she ends up not having time to take a step back and focus on strategy. This is not a job that you can do part-time after you get home from a 40 or 50 hour a week job.

Family council chairs have some pretty unsavory responsibilities, including managing disgruntled family members and responding to them in a professional way. There’s also increased accountability if you’re getting paid for the work, and the family has some recourse if you’re not getting your work done or you’re not attending well enough to the not-so-fun tasks.

If you do compensate your family council chair, then the family can rely on that individual and not feel guilty that they’re doing all this work and not getting paid.

Benefits of paying a salary to the family council chair
– The family is better able to meet short and long-term agendas
– The family council chair can be held accountable
– You have a point person to do all that hard work
– You’re able to be more strategic as a family
– Nobody feels guilty that you have one person doing it because they’re being fairly compensated

How do you decide how much to pay somebody?
Step back and look at the scope of the family council chair’s responsibility. Don’t look at the specific task they’re doing. Look at what they’re responsible for. If you haven’t been paying them up to this point, what they’re doing may not reflect the full scope of their responsibilities.

Look at all the things that need to be done to address the short-term agenda, the annual list of tasks necessary to hold smoothly-run meetings, implement policies, and so on. Step further back, and think about what you have to do strategically as a family to be a good partner with a growing business. For example, you need to develop a Next Generation program, or you need to cultivate a deep bench of family directors. Overall, you need to increase the stewardship capabilities of the family.

Does the family council chair’s job look familiar? In many ways, the council chair of a family business performs similar functions to a human resources person at a corporation.

When you scope out all the work that’s being done and that needs to be done, you can then estimate how many hours a week it will take to get this accomplished. Look at the HR department in your company to identify a position with a similar set of responsibilities, and use that person’s role as a benchmark for the family council chair position. Now you have a reasonable estimate for what a fair salary might be, and you can reduce it if the chair is not working a full 40 hours a week as a comparable HR employee might.

Running the family council in a successful family business is a job. Having a dedicated professional in this role is crucial to the success of the business and to ongoing harmony within the family. If you want the family’s needs to be that person’s top priority, why not compensate them? Your return on investment will be immense.

Why Family Engagement is Important in a Family Business

Engagement is one of the most critical issues that families face, but most don’t know why it’s important.

So many family businesses are making investments for the next generation, which is my family’s case means my children and their cousins. But many families are doing nothing to fully engage all generations of the family, make succession plans for key leaders or develop that youngest generation. They don’t know how to be engaged with the business without being overreaching, so they try to be disengaged. But that can cause even more problems than over-engagement.

I have spoken to many families who make long-term investments and set up the business for success for the sake of coming generations, and yet they’re not doing any work to make sure that the family at the youngest age is ready and excited about being a part of a family-owned business. It’s one of the ways people focus on the business side and forget why the family is important.

If you go to the 30,000-foot level, it takes three different entities working together for a family business to be successful. You have to have a good management team. You have to have a strong board. And you have to have a highly functioning, supportive, and engaged family.

When you look at all the different risks to a family business, often the biggest risk is the family. It’s the one that can decrease the value of the business quite quickly through lawsuits or big fights. But the family can also endanger the business through unengaged shareholders. A disengaged family is more likely to sell back huge chunks of stock, which decreases the value of the business and ties its hands in terms of future investments.

If you think about engagement from a risk perspective, the best kind of engagement you can get is a family that experiences a high return. Not only do they have a financial return, but they have an emotional connection to the business, how it interacts with the community or the employees, or the products it makes. The family experiences a relationship return in that the individuals feel connected to each other in some way. It has to be pleasant to be together even if you don’t like each other. You have to be able to work together and get along.

When you have strong engagement, you have an environment where the family is adding to the business and increases the bottom line. Positive engagement shows the management team and the board that the family is invested for the very long term, so it makes sense for the business to invest for the very long term as well, and for the board to support that.

Often, families think to be engaged they have to give the business some advice about how to operate. And that’s not helping. It’s not good for the business. If you don’t work in the business you should not be giving business advice.

So the question is: What is engagement if you’re not involved in operating the business? What does the ideal amount of engagement look like?

The Risk of the Disgruntled Shareholder

In a family business, there are several threats to remaining family-owned. One risk is that the whole family loses interest. Another is that the industry moves in a direction that the family can’t accommodate, so the business stops adapting to the marketplace and is no longer viable.

But there is another big risk that families almost always have the ability to manage with extra diligence and planning. I’m talking about the risk involved in not managing family relationships. If families don’t invest in the relationships as much as they’re investing in the business and the board, they run the risk of a disgruntled shareholder or a family branch doing their best to make everyone else miserable. An even bigger risk? The possibility of that disgruntled individual or faction deciding to sell their share of the family business.

Agreeing to a stock sale is often an attempt to buy your way out of your problems. But the lasting damage that that does to a family is pretty significant. Even if the family feels like they’ve set this group or this individual freedom, there’s always going to be a feeling of loss. It will leave a hole in your family fabric that you can’t see in advance, but it’s one of the negative legacies you’ll be passing down to future generations. Like a sudden death, buy-outs remove the opportunity to heal rifts or solve problems within the family. It impacts the family long term because any problems that exist now are frozen in time. The resulting pain is going to be part of your family forever.

Buy-outs are also problematic because sometimes they’re only a temporary solution to the conflict. If the family has any kind of trust or estate plans already in place, someone could end up inheriting stock back again. It will be even harder to mend fences if an inheritance brings an individual back into the family business after a buy-out.

Buy-outs can have a negative impact on the business itself because they reduce the operating capital that the business can use to grow. You’ve shrunk the size of the business if you take out a shareholder or an entire group of shareholders. You’re also sending a message to your board and your management that you don’t have unity within the family, and that your family is not in alignment with the business and the board.

In the families I’ve spoken with, buying out a troublesome individual or branch doesn’t end up feeling like a good resolution. There may not be open conflict anymore, but the conflict has been replaced with the sorrow of having lost a family member or an entire branch of the family.

It’s also not a good resolution for the people who left the family business. Buying your way out of a problem rarely works, because the underlying issues follow you. It’s better to try to address the issues that are causing strife, even though the process can be quite painful. An individual or branch who feels disenfranchised or disgruntled probably has a legacy of reasons of why they feel that way.

There are situations where a buy-out is really the only option, but those situations are in the minority. If the people involved don’t want to resolve things, it’s almost impossible to force them to heal the rift.

Sometimes people are in so much pain that they want to create pain for other people. They want to create a problem, and there’s not much you can do about that. There are people you cannot make happy, no matter what. In that case, a family needs to figure out how to prevent those people from driving their entire agenda. It’s easy to give unhappy individuals too much power. That’s because when a family sees someone in pain or upset, their instinct is to try to fix it. Instead, it’s important to focus on the happy majority, people that are happy with the business, the family, and the board. Figure out how to cater to the larger, more positive group, while trying to bring the disgruntled shareholders back into the fold as much as you can and keep that dialog open.

I’ve found when you do that, the unhappy people are not in the spotlight anymore. It becomes less fun to jerk people’s chains. When someone refuses to negotiate or accommodate, they are really in control of the entire family. Taking away their ability to rattle everyone takes away some of their power.

This method may prevent a family from going down the path of buying someone out, but don’t think that this path will be easy. It’s much harder to do the work of trying to keep the family together. This requires everyone to take a hard look at themselves and their involvement in the family, to figure out whether the unhappy person has legitimate complaints, and look for ways to make changes or concessions to accommodate this unique voice in the family.

When you don’t take the easy way out, it’s a net positive. In implementing ways to pull this person or group in and trying to move forward in your agenda, you’re taking control of that individual group and you’re moving that family forward in a really positive way. The family and the business will both be stronger as a result.

The Lodis Forum: The Beginning

My first year as Chairman was not what I expected. I had three weeks to get my feet wet in my new role, and then the pandemic hit. I went from knowing what to do to being confounded in a matter of days. I spent countless hours in meetings trying to navigate the competing priorities of employee safety and serving our customers as an essential business. Also, I spent a significant amount of time reassuring our corporate board and family shareholders that we had a plan and would survive this crisis. It was a tough first year.

Six months into the pandemic, I was suffering from too much stress and isolation. I wasn’t spending time with my beloved husband and children, getting exercise, or taking a break from the computer. Since I have a severe autoimmune illness, we were taking the lockdown seriously. A mere fever could prove fatal, and we were worried about how my body would react if I got COVID.

In “normal” times, my job is challenging and draining but also energizing.  I was just left with all the complex, mentally and emotionally draining work once we were on lockdown. It was by chance that I found a new source of energy that was safe and socially distanced.

About six months into the pandemic, I spoke at a virtual conference with an excellent networking app. I started reading through attendees’ bios and started reaching out to people who sounded interesting. It was a joy to meet new people. I hadn’t met anyone new in months, and I found it imminently energizing. Each new person I met resulted in additional connections. I stumbled upon another female board chair, and instantly I realized how isolated I had been. Being Chairman is lonely. Being a female Chairman is such a rarity that I had only met one other female Chairman in my entire career. At the end of our first conversation, I felt energized, enthused, and a little bit restored. We vowed to find other women who were Chairman. It was the beginning of The Lodis Forum. Since that first conversation, I have met so many smart, talented, and resilient women. It has been a joy and a lifesaver.

Managing Succession Through the Use of a Corporate Board

I’ve noticed an active trend towards instituting private company boards. Owners are using boards to help mentor, validate, and monitor family members in senior leadership roles, and to assist with succession when it’s time for those leaders to step aside.

But there are still many family businesses that are hanging back, concerned about the potential risks of establishing a board of directors. These fears come from a misconception about the ways that a private company board differs from a publicly held company board.

I have spoken with hundreds of families over the last few years about corporate and family governance. Many are struggling with managing succession, or with handling transformative change in their industry or in their business itself. I ask them if they have a board, and most of them don’t because they don’t want to give up control.

I can understand their concerns. We all hear a lot of horror stories about the risks of establishing a board, but many of those risks don’t apply to private companies.

Differences between public and private companies

Boards of Publicly held companies:
– Work for the shareholder of the hour or quarter
– Are often hostile and have activist shareholders
– Can vote the chairman and CEO off the board
– Have directors who are not in alignment with one another

Boards of privately held companies:
– Work for the current and next generation of shareholders
– Are very aligned with each other since each director represents all of the shareholders
– Are often very congenial and work towards providing guidance and resources to the CEO
– Don’t have the power to vote off the chairman of CEO because the family can call a shareholders meeting in a matter of minutes and call an election to remove the slate of directors

Private Company Boards Reduce Risk
In a privately held company, shareholders are much more aligned, even if there are diverse opinions. They share a long-term perspective on the company, taking a patient capital or stewardship approach. When you look at what a fiduciary board does for you, they’re spreading out the risk that you’re going to mess something up as chairman or CEO. They help make sure that you’ve thought of all the different angles, all the different risks, and that you have the resources you need to be successful. With a fiduciary board, the CEO and chairman have resources, somebody to talk to and think things out with.

Managing CEO and Chairperson Succession
Thirty percent of the family businesses in the United States are going to go through succession in the next 10 years. That means a lot of inexperienced leaders stepping into crucial roles. Often, when we’re transitioning leadership from one generation to another, there’s an education and experience lag with someone who is a generation younger than the person they’re replacing.

Boards can help you mentor and grow the skills of a potential successor. They can help validate your choice and make sure you haven’t chosen a successor who’s not qualified to move the company forward over time. And after the transition has taken place, the board can step into a more active role, bridging between the previous generation of leaders and the new generation. They can provide backup for an individual who doesn’t have the experience of the senior generation and help maintain the value of the company over time.

Boards can also help the new leader gain the trust of the family. If the board is well respected by the family, their approval can help a new CEO or chairman get buy-in, and it can be much easier for them to move forward as a credentialed individual who has the trust of the family.

Managing Family Council Succession
In addition to helping with the succession of a CEO or chairman, the board can also help replace an outgoing family council chair or family director quite easily. That way, people walk in having been validated by the board, and there are fewer question marks about whether their selection was strictly nepotism. While you can’t completely avoid nepotism in a family business, you can at least make sure new leaders are also selected based on their skills and experience, not just their family relationships. Having a well-regarded board in place helps immeasurably with this process.

My family has gained a huge amount of value from our board. We are in the midst of replacing two family directors who are stepping down. Our board is going to interview all of our family director candidates and make a recommendation about who is the most qualified, which will increase our chances of getting the best possible people for the job.

In most cases, private companies can benefit greatly from having a board. They provide crucial support to the CEO and chairman and help reduce the risks involved in replacing the company’s leaders. They come with fewer problems than the boards of publicly held companies, and their benefits greatly outweigh the risks.

The Functional Test: How to Detect Board Dysfunction

Most boards are not outwardly dysfunctional. The most egregious dysfunction is easy to identify, like when directors getting into shouting matches or jump onto the table to prove their point. But just because you don’t have a board in the extreme doesn’t mean that your board lacks dysfunction. Often dysfunction is under the surface. It isn’t apparent and can be easy to ignore or miss altogether.

There are a few signs your board is dysfunctional. Do directors meet outside the boardroom to build a position before the board meeting? Do you have directors on your board who don’t prepare or are over boarded and can’t keep one board straight from another or a director that no one takes seriously? Does the board treat the executives or each other with disparagement or disdain? Do you have directors vying for power and influence? Do you have directors who, even after coaching, keep up their bad habits? If you have these behaviors on your board, they are likely subtle. You might not even know that this is happening behind the scenes.

I spoke with a Board Chair of a privately held company recently, and she shared some insights on the attributes of a functional board. It might be easier to do the “is my board functional test” rather than rooting around for subtle dysfunction. Functional boards have cohesive and effective directors and a Board Chair who is willing to make the necessary changes to support the company strategy and board functionality.

Functional Boards
Functional boards do the following:

1. Demonstrate overt kindness before, during, and after meetings, but don’t hesitate to get into deep and sometimes controversial discussions. Genuine kindness, not just congeniality, builds trust and provides a secure foundation for productive dialog.
2. Conduct an annual review of governance documents and company purpose and mission.
3. Reflect the culture of the business in the board composition and dynamics.
4. Share the company values intrinsically.
5. Support board composition discussions and are committed to making the changes necessary in the board room to support the company’s changing strategy.
6. Identify and report any conflict of interest.

Functional Board Chairs
Functional Board Chairs build a functional board in the following ways:

1. Support the board activities with strong governance.
2. Excel in difficult conversations.
3. Conduct an annual board evaluation, including individual director feedback and a formal CEO evaluation.
4. In conjunction with the Nominating and Governance Committee, conduct an annual skills matrix adjusted for the evolving corporate strategy.
5. Make board composition changes to support the strategy or to ensure a functional board.
6. Develop an annual plan for board activities and reflects this in a board cadence document, shared with both the board and management.

Another Board Chair I recently spoke with said that she finds it difficult to read between the lines, watch body language in meetings, and hear the subtext in comments and considerations, especially when leading the discussion. She said, “I rely on my other board members and my CEO, in debrief calls, to help me gain a robust understanding of the whole picture.”

Having a functional board is an evolution. What is functional today may not remain unless there is a drive for excellence, willingness to have meaningful and difficult conversations, and courage to make the necessary adjustments to composition, governance, or cadence. Ultimately, a board is only functional if the board and Chair are willing to do the required work to achieve board excellence.

Board Diversity: Overcoming Fear and Complacency to Build a Truly Diverse Board

We have all seen the data and research on how board diversity improves the bottom line. The message is clear, take diversity seriously, make the necessary changes, and your company will thrive. (Although there are many ways to measure diversity in a family business board, including independents vs. family, inside vs. outside, gender, racial, LGBTQ+, director skill sets, age, etc., this article will focus on gender diversity.) Given that 49% of boards have at least one director on their board, needs to step down, and 21% say that two directors need to go (2020 PWC Corporate Governance Survey). One would think that if board diversity is a proven way to increase profitability in one’s company, and many boards have at least one dud-director, why aren’t we making more progress?

I’ve been struggling to understand this lack of motivation to address the board room’s diversity shortfalls. In the same PWC study, only 12% of boards chose not to renominate a director, and only 14% was a director asked to retire from the board, even though there are close to 50% of the boards should ask at least one director to step down. Why are Chairmen and Nominating Committees willing to wait out low performers? Why are they willing to forego a high-performing, results-driven, diverse board?

It all boils down to complacency and fear.

Complacency:
After all, directors become friends with each other; they can spend a decade or more in each others’ company. We all have a friend who may not exhibit good judgment all of the time, but that doesn’t mean that we cut them loose. The same is true in the board room. The camaraderie and kinship in the board room cloud judgment and that clouded judgment can quickly gloss over a non-performing or disruptive director’s actual contribution. It’s easy to let term or age limits take the place of a difficult conversation. In a sense, waiting it out preserves the friendship.

One of the most compelling findings I uncovered as I struggled with this question is that there are thousands of articles on term limits and age limits, but few on how to ask a director to resign. Google doesn’t lie; people would rather set an artificial time limit than proactively fine-tune the board with the talent and expertise needed to propel the company forward.

Fear:
I recently spoke with the private company Chairman of a diversified portfolio of businesses. In our discussion, she mentioned that this unwillingness to have a difficult conversation or make a difficult decision is keeping boards from taking that first step towards a high-functioning diverse board.

Asking a peer to step down from the board room, especially one with decades of experience, can feel risky. After all, how do you know if you will find someone as talented or knowledgeable about your business? Isn’t history and legacy worth something in the board room?

Another Chairman I know had to ask two beloved directors to step off her board. They had served tirelessly for more than 40 years combined. These directors had seen the company through multiple CEO changes, Chairman transitions, and an unparalleled growth spurt during their tenure. She struggled with this mightily. Although it was the right thing to do for the board and the company, how did she ask her directors to step down in a way that conveyed respect and the honor that it deserved? She was worried about how the board, company, and family would react to the transition. Bucking the wait-it-out trend of so many of her peers, however, she mustered the courage and made the transition.

How to work towards board diversity
I have read many board prospectus over the years, and almost all require applicants to be a CEO. What happens when only 6% of CEOs are women? How many of them are highly coveted and already sitting on several boards? Of the 25% of women in the c-suite, many have never had P&L experience. That rules out almost all of these successful and talented women from obtaining a board seat.

If a board wants to work towards board diversity, consider these steps:

1. Ask your non-performing directors to step down to clear a space for new talent and fresh perspectives.
2. Review the company strategy and identify the skill sets you need in your directors, not their experience. Focusing on skill sets broadens the pool for your recruiter. If this is your first diverse director, consider bringing on more than one diverse director in this round. It will save her from being “the only woman in the room” or “the only minority in the room” and give her a better chance of having her ideas thoughtfully considered and her voice heard.
3. Find a recruiter who will take the time to understand your company, culture, and values. She will screen out all those candidates who don’t meet the basic skill sets or live the values.
4. Tell your recruiter you only want to interview diverse candidates. That’s one way to ensure that you find a diverse director with a suitable skillset and values fit.
5. Create a board succession committee, ensure that all participants are excited about the project, and bring diversity into the board room.
6. Consider appointing your diverse director to a board leadership role. Appointing women to board leadership roles is the fastest way to achieve diversity in the board room and will provide unique and valuable input into the board agenda.
7. Develop a robust onboarding program and ensure that the diverse director, especially if she is your first, feels welcome and can make a meaningful contribution from the first meeting.
8. Implement a Diversity and Inclusion program at the company to ensure that the company reflects the diversity values up and down the company ladder. This ensures that future boards will have an abundance of qualified women from which to choose.

Waiting for a director to age out or term out is the recipe for a low-functioning board that won’t bring strategic value to the business. Fear and complacency prevent all of the positive things that come with change. Bringing on new, diverse directors will energize your board. You will be challenged in your

Board Excellence: A Journey Not a Destination

With all of the resources, skills, and expertise around governance excellence, one would think that there is a simple checklist of things to do to achieve it, and voila, your board is excellent. 

However, we all know that it doesn’t work this way. Even implementing all of the recommended best practices still only scratches the surface of board excellence. First, achieving excellence is a process, not a destination, and second, boards are trying to work with people to oversee an ever-changing landscape of challenges in the business.

There are, however, several essential practices that the Chairman can implement to move along the path of board excellence:

1. Identify board dysfunction. Even with all of the world’s be processes, a board will not achieve excellence if there is dysfunction in the board room, either in communication practices, treatment of management, or an over boarded director. 
2. Embrace the difficult conversation. With whomever the conversation needs to occur, don’t avoid it to maintain peace or congeniality
3. Change the board meeting structure. Move away from long management presentations, which leave little time for deep discussion and dissent. Getting the debate on the table is a great way to mitigate dysfunctional ex-board room discussions between directors.
4. Incorporate an Executive Session. Each meeting should have time set aside for an executive session. This is another way to get items in front of the whole board for debate and avoid unproductive conversations outside of the board room.
5. Conduct a skills assessment every two years. The board composition needs will change as the company evolves, ensure that the right talent and skillsets are on the board. If not, consider this a significant focus for board education.
6. Conduct an annual board evaluation. Consider hiring a 3rd party to conduct a board evaluation. You will be surprised how candid a director will be to an outsider.
7. Implement change. Document and make an implementation plan for the recommended modifications identified in executive sessions, board meetings, or board evaluations. Demonstrating a willingness to change and adapt practices will be reassuring to management and board and will generate additional feedback on how to move towards board excellence.
8. Refresh the board. In the 2020 PWC Annual Corporate Directors Survey, nearly 50% of respondents thought that at least one director was no longer adding value. Don’t hold on to directors for too long. If a director has stopped adding value or a different skill set is needed, don’t wait for the director to age or term out. Be proactive.

Not all boards are on the path to excellence. Not all boards even know that it exists, but those boards that are determined to act as fiduciaries to the shareholders and add value to the business understand that board excellence is a journey, not a destination.

Board Dysfunction: Who is Ultimately Responsible?

We have all seen the data and research on how board diversity improves the bottom line.  The message is clear, take diversity seriously, make the necessary changes, and your company will thrive. Additionally, the PWC 2020 Corporate Governance Survey showed that 49% of directors believe that at least one director on their board needs to step down, and 21% say that two directors need to go. 

One would think that if board diversity is a proven way to increase profitability in one’s company, and many boards have at least one dud-director, why aren’t we making more progress? All of the data seems to point to complacency. I’ve been struggling to understand this lack of motivation to address the shortfalls in the board room. In the same PWC study, only 12% of boards chose not to renominate a director, and only 14% was a director asked to retire from the board. Why are Chairmen and Nominating Committees willing to wait out low performers? Why are they willing to forego a high-performing, results-driven board? 

One of the most compelling findings I uncovered as I struggled with this question is that there are thousands of articles on term limits and age limits, but few on how to ask a director to resign. I recently spoke with the private company Chairman of a diversified portfolio of businesses. In our discussion, she mentioned that this unwillingness to have a difficult conversation or make a difficult decision is what is keeping boards from taking that first step towards a high-functioning diverse board.

Waiting for a director to age out or term out is the recipe for a low-functioning board that won’t bring strategic value to the business. Avoidance of these challenging conversations prevents all of the positive things that come with change. Bringing on new, diverse directors will energize your board. You will be challenged in your common precepts; you will find yourself having a more robust dialog about the company’s issues and challenges. Your board will deliver greater value to the company. Given the cost of time and money to have a board, it is the Chairman’s responsibility to get the most out of its directors by being willing to do the most formidable job, have the difficult conversation.

Conversation with the Chairman of Midmark: Anne Eiting Klamar

MEET ANN EITING KLAMAR

Anne Eiting Klamar is currently the Chair of Midmark Corporation.  She was previously the fourth generation of the Eiting family to hold the title of President & CEO at Midmark Corporation.   Anne was voted into the role by Midmark’s Board of Directors in April of 2000.  She was named to Midmark’s Board in 1993 and served as corporate secretary.  Prior to coming to Midmark, Klamar practiced medicine for more than five years as a staff physician at Family Physicians of Urbana, Ohio.  

Anne is passionate about bringing healthcare to those who would otherwise have none, mentoring young people in business and medicine, sitting on boards of family-held companies, and working at the university level.  She is currently on the Ohio State University Foundation Board of Directors, among a number of other boards, both past, and present.

Klamar received her Bachelor of Science degree from the University of Michigan and graduated with her M.D. degree from the Ohio State University.  She is also a graduate of the Owner/President Management program at Harvard Business School and is an Executive Scholar with Kellogg School of Management at Northwestern University.  She lives in Versailles, Ohio with her husband, Rob, also a physician  They have two grown sons.

Excerpt from Women in Board Leadership Podcast: Episode 1

Anne Klamar, Chairman of Midmark, has served as Chairman of the Board for more than five years. Prior to this, she was CEO of Midmark for 15 years and spent her early career as a medical doctor. She has served on the Midmark board for more than 20 years and served on several for-profit and not-for-profit boards. Midmark is the only clinical environmental design company that enables a better care experience. At the point of care, their focus is on harmonizing space, technology, and workflows, which allow for more efficient care and better outcomes for patients.  


Can you provide a little bit of background about your family and business?

I am the fourth-generation family Chairman and prior CEO of our family company, started in 1915 by my great-grandfather. We are transitioning from the fourth to the fifth generation.

We have one fifth-generation family member working in the business, not in a leadership role. Still, she’s very competent at what she does—we manufacturer for the medical, dental, and animal health spaces, clinical exam rooms, primarily. But also integrate workflow and design so that we’ve become more than just a medical manufacturer.

We’ve become a medical device company through our digital diagnostics and digital imaging. And now, we are moving forward into the real-time locating system hardware software space to track efficiency in medical office buildings and hospitals. And therefore, improve the efficiency of how medicine is practiced.


Tell me your family and company in terms of the complexity and challenges.

My brother, and sister, and I all worked in the business together. We all were happy with our roles, me as CEO and them in their respective roles. And I have a high level of regard and respect for my siblings, although we’re very different.

My siblings and I look like an odd assortment on the one hand; on the other hand, I respect them for their roles in the family, and we work well together. We don’t think the same way, but we work when you put all three of us together. Is it perfect? No. Is there a dysfunction? There is probably in every family, but when the chips are down, I feel responsible for them and the company. I love them. It’s held us together well.  


Tell me a little bit about your history and becoming Chairman. I know you are serving as CEO for quite a while. What was that transition to Chairman, and what brought it on? 

I am a physician, and I was asked to join our board of directors in 1993. When I finished residency, I was on the board for seven years. There was an external successor brought in to succeed my dad, who didn’t work out. The board then launched a national search at that point. I knew about all the candidates, but I didn’t realize that I was one of them! In April 2000, I was asked to leave the boardroom, and I assumed I would be fired. When I was asked to come back into the room, the board said, congratulations, you are the new Midmark president. I was shocked. I didn’t have the presence of mind to say no. I did say, as a shareholder in this company, this is financially irresponsible. This company is on hard times right now; we are losing money, there was a failed succession plan, and I have no skillsets. The board said they had a high level of confidence in me. Whenever I started to doubt my ability to lead the company, I thought of the board and reminded myself that they would not have put me in this role if I could not succeed. 

For the first four or five years, it was just finding my way and developing leadership skills. Physicians don’t necessarily have great leadership skills. They tell people what to do, and people do it or not. That doesn’t work in business. When I was 15 years into the role, I realized that as CEO, I was tired. I’d given my best and played as hard and as long as I could. In 2015, I told the board that I was ready to retire. I knew I had done my best, and I was prepared to support my successor in the next stage of the business.  

The next day, Midmark’s Chairman called and said that his company was getting acquired and the new owners didn’t need a CEO. It was such lucky timing, as he was my first choice for a successor. When I asked him to be CEO of Midmark, he agreed to do so if I would become Chairman. We swapped roles, he replaced me as CEO, and I replaced him as Chairman!


Let’s turn now to board dysfunction and composition. What have been your issues and challenges in the boardroom, and how has your thinking evolved around composition? 

The board that I inherited was my dad’s board. It was a good old boy, yes-man board. And that worked for him, but it didn’t work for me. I had so many glaring deficiencies in terms of industry skill sets, marketing, and operations. I had to build my board based upon skill sets to support my areas of growth.

When I first became Chairman, I had two quietly dysfunctional board members. One was not a bad person or board member. It’s just that the skill set he brought to the board 15 years before was no longer relevant. The other one was more dysfunctional and largely self-unaware. I used the annual board and peer interviews, which I conduct, supporting information when asking a director to step down. 

In the annual interview process, the board has been great about being honest and transparent about their opportunities for improvement and the frank assessments of their peers. I have had to ask board members to step down; some acquiesce graciously, and others more reluctantly. 

As a Chairman, it’s important to set up the expectations that they are here to serve the company and shareholders. This is not an appointment for life. Directors are evaluated every year and will be voted upon by shareholders.

Instead of terms or age limits, I’d rather have conversations. With term limits or age limits, you’re setting up an entitlement mindset until you hit that limit. And then it becomes awkward to ask people to step down before they reach their “limit” because now you’ve breached into that entitlement range.

Difficult conversations are uncomfortable. Boards would rather wait somebody out, wait out a non-performer than expect excellence and replace a peer.  No board members are irreplaceable, they may think they are, or you may think they are, but you know, boards change. Healthy turnover is good for the board. 

We do a board skills assessment every year, which supports healthy turnover, looking at what skill sets we believe we’re going to need: tied to the future and the company’s strategy. We have had a lot of luck reaching into our networks and asking our networks to network because values and culture are so important to our success. I’ve managed a fair amount of board turnover. Still, it always ends up being better, even though it’s hard at the moment. 


What is your advice for a new Chairman coming into the job or an existing Chairman who wanted to address dysfunction and be the highest performing chairman they could be? What would it be your advice? 

An excellent Chairman has high EQ, including empathy, understanding, courage, and a willingness to be uncomfortable. If you’re going to be a good board chair or even a good leader, you must be willing to sit with discomfort and allow yourself to be challenged. One of the hardest things about being the board chair is ensuring that others feel empowered to tell me no. I need to know people willing to challenge me both in the boardroom and out of the boardroom. The role of Chairman can be isolating because you’re the only one in the room that has the job you have.