In business, as in life, there’s a benefit to having guidance that’s tried and true. Most successful business owners can cite mentors who have directed their paths along the way. As companies grow, those informal relationships are usually replaced by formal boards of directors. A board of directors is a very useful method for allowing significant shareholders to feel they have a say in the strategic planning for the company.
It’s my opinion that all companies – regardless of size – need to have a board. In this two-part series, I will explore the benefits that a small company can gain from having a corporate board and how a small business owner can establish a board.
First, let’s examine the benefits:
1) A good board of directors will do what employees often are afraid to do: challenge the leader. Most employees don’t feel empowered to speak up when they think a strategy is misguided or out of sync with customers or a target market. Board directors should be willing to openly question ideas and the assumptions that guide strategic planning to help the president or CEO suss out their soundness.
2) A board can provide accountability – particularly in family-run businesses where it can be hard for an unbiased assessment of the business without familial issues clouding judgment.
3) Boards can help with recruiting, evaluating and selecting top job candidates, as well as setting compensation criteria that are fair and transparent. Since directors are removed from the daily running of the business, they can help with succession planning.
4) For companies considering a public offering, setting up a board early can help acclimate the owners to the enhance scrutiny that they will face once the company is publicly traded.
5) A board of directors is legally required for registered corporations.
Next column: How to create your own board.
Patricia Adams is the CEO of Zeitgeist Expressions and the author of “ABCs of Change: Three Building Blocks to Happy Relationships.” In 2011, she was named one of Ernst & Young LLP’s Entrepreneurial Winning Women, one of Enterprising Women Magazine’s Enterprising Women of the Year Award and the SBA’s Small Business Person of the Year for Region VI. Her company, Zeitgeist Wellness Group, offers a full-service Employee Assistance Program to businesses in the San Antonio region. For more information, visit www.zwgroup.net.