Asounding board and set of experienced mentors is exactly what every type of business needs. Gaining outside perspective on issues can help a business owner make grounded, forward-thinking decisions. A properly functioning board of directors will hold owners accountable for goals and provide insight on a variety of matters.
“The most successful companies are run by individuals who acknowledge what they don’t know and seek the counsel of others,” says Stephen Christian, Managing Director of Kreischer Miller.
A board of directors can fill a knowledge gap in a business if the owner recruits the right people and interacts with the board regularly. Smart Business asked Christian for advice on choosing advisors to maximize a board’s success.
Why utilize a board of directors?
Business owners are often caught up in their own worlds, dealing with the issues of the day. Unfortunately, all too often, the bigger, more strategic issues are relegated to the bottom of the list either because of time or lack of expertise. If utilized properly, a board of directors will provide quality, independent counsel on strategic initiatives and a forum for accountability in accomplishing tasks. In addition, a board can supplement internal skill sets, assist in resolving owner conflicts and provide credibility to the business in the eyes of outside stakeholders like banks and bonding companies.
What are typical issues a board addresses?
A successful board of directors advises owners on a variety of topics. At the broadest level, it assists in developing or validating the company’s mission and strategic direction, and managing risk within the organization. On a more basic level, the board may be involved with evaluating top management’s performance and their compensation, analyzing financing strategies and providing counsel on succession issues, which may range from attracting and retaining future leaders to selling the business. In essence, the directors will address any issue that affects the well-being of the organization.
What types of companies benefit from utilizing a board of directors?
Although most people associate a board of directors with public company governance, all companies, regardless of size and complexity, can benefit from utilizing a board. Owners of all levels of sophistication and functional backgrounds will find it advantageous to receive a fresh, outside perspective on what they are trying to accomplish. Why not take advantage of learning what has worked and what hasn’t through the experiences of others?
Who should serve on the board?
The easiest part is convincing owners to utilize a board. The hardest part is finding the right members. Typically, the best board members have entrepreneurial experience and strategic thinking capabilities, often found in business owners. These people have lived the decisions the owner is currently confronting. A board member may or may not have worked in the same industry. Both perspectives are valuable. If an owner lacks a marketing background or needs help boosting sales, he or she may seek a member with proven track records in these areas. If specific industry related insight is required, an owner will seek an individual who is respected in the field. Choose members who can fill a need. Also, be sure this person has an interest in the process and cares about the success of the business. A board should include a combination of members from inside and outside the organization and should consist of an odd number of people in the event a plurality is required.
How does a business owner find quality candidates?
Networking. Business owners should let people know that they are looking for board members, but be specific as to the qualities desired in a candidate. In particular, talk to accountants, attorneys, bankers and other professional associates. These are people who best know the business.
How can a business owner maximize success with a board?
Managing a board of directors is a time-consuming process. If done right, the value of the board will far outweigh the cost. There are certain ground rules that, if followed, will provide an environment for the board to reach its maximum potential. Meeting dates should be strictly adhered to members are busy people and will have little tolerance for canceled or rescheduled meetings. A substantive agenda and concise, high-quality information should be forwarded to the board members well in advance so that it may be reviewed and digested. A well-organized, prepared chairman is a must so that all parties involved can make maximum use of the time together. Keep an open mind to others’ suggestions. And, finally, a matter many boards struggle with, have the courage to replace non-performing members.
STEPHEN CHRISTIAN is Managing Director at Kreischer Miller in Horsham, Pennsylvania. Reach him at email@example.com or (215) 441-4600.