If your company is about to decide to establish a board of directors and commit the requisite resources to its creation and maintenance, there are several matters that should be considered.
The ultimate challenge is not in deciding to go forward with a board, but having a clear sense of what it really takes to be successful well before deployment.
To assist you on this journey, the following five areas of consideration should serve as a diagnostic check in determining your overall state of readiness.
Business intent: Does the business have a clear sense of what it needs to accomplish and how success will be defined as well as measured? Is the intent to get the business ready for sale, further professionalize to drive greater value creation, prepare the next generation for success, prepare for an acquisition, evaluate and refresh the strategic plan of the enterprise?
Owner mindset: It takes humility, a willingness to be challenged and appetite for change before any guidance and advice can be properly utilized. It makes no sense to recruit talented advisers if you cannot harness yourself and the overall organization. Receiving pointed feedback with good intention requires discipline and a hunger for continuous improvement.
Organizational readiness: Is your leadership team aligned with the purpose of the board? Does the broader organization understand your intent in the formation? What is the commitment to the human capital that will be required? Can you realistically take action on what is suggested? Do you have the intestinal fortitude to stay the course realizing some board meetings will be more effective than others? What is your post-board communication plan?
Market access: The composition and quality of the board is critical so approach it like any other major human capital investment. The recruitment process is time-consuming, so work with your leadership team and trusted advisers to develop a plan of attack. Be clear on who will recruit, interview and onboard each advisory board member.
Financial commitment: Beyond the actual dollars that will be spent in paying each board member, do you have sufficient discretionary capital available to act upon these recommendations?
In many cases, these will be unplanned activities that just make sense and require action to be taken. This could be commissioning a study, mentoring high potential talent, investing ahead of what is budgeted or acting upon an unplanned business opportunity.
Research has pointed out that only a small percentage of privately held businesses have deployed a board of advisers, and I will address in a future article what is holding back this low adoption rate. Hopefully, the insight provided here will better prepare you for making an informed decision as you evolve as a business entity. ●
Marc Rosen is founder at The Vector Group