Despite the recent kafuffle over high-profile instances of bad corporate governance, boards of directors or advisers remain one of the most powerful weapons in an entrepreneur’s management arsenal. Surround yourself with the right people and your company can increase its credibility and gain access to potential customers, suppliers and investors. Most importantly, a board can bring fresh ideas, different perspectives and hard-won lessons to the management table — which is great for lone-wolf entrepreneurs who work in a decision-making vacuum.
Nevertheless as all those corporate scandals suggest, building and running a successful board takes more than convening a gaggle of yes men for monthly backslapping sessions. Selecting suitable advisers and helping them help you are keys to effective boarding.
Who should sit on my board?
The most effective boards comprise people with mission-critical experience and expertise that you or your company lack not only today, but will also need in the future. So the first step in building a team of advisers is simply to catalogue the shortcomings of you and your senior executives. If marketing experience is lacking, add an adviser with deep marketing roots to your wish list; if you’re hoping to raise venture capital, target people with experience in attracting private investment.
Although the functional skill sets of board members vary greatly, good advisers share some key characteristics. Typically, they are vibrant, enthusiastic people with the ability to look beyond their own industry and offer advice that will help your company grow and succeed. “A good board member is someone who is able to act in the best interest of the company, with no vested interest in couching the truth,” adds John Wilson, chairman of TEC Canada, an executive networking group. As a result, says Wilson, your board should never consist of suppliers or customers.
Nor should your friends and family sit on your board. “You’re looking for people with independent minds that can ask tough questions,” says Tim Rowley, a professor of strategic management at the University of Toronto’s Rotman School of Management. “By hiring friends, you usually decrease that ability.”
To find potential advisers, tap into your personal and professional network for potential board members or use a professional search firm, which can corral candidates based upon selected criteria.
How can I attract and retain advisers?
Once you decide upon whom you want on your board, go after them. No one is out of range, no matter how skilled, experienced or famous, provided you effectively promote the benefits of being on your board.
There is a wide range of possibilities in terms of compensation for your board members. Generally, says Rowley, you should offer stock instead of cash; after all, if board members have a vested interest in the company, their interests and decisions are more likely to be aligned with those of the company. Dave Taylor, principal of Denver, Colorado-based consultancy growingventures.com, suggests you implement equity payments over time and based on the contribution of each board member.
Don’t let limits to your tangible compensation options deter your board-building efforts. Payment in kind can also be effective. “If you were a video rental firm,” says Taylor, “you could offer board members free rentals. It sounds a little trivial, but it does show that you’re interested in their experience as customers and you’re giving them the chance to be full community members.”
Other intangible rewards include the opportunity to make contacts with different industry executives, the knowledge board members gain from interacting with each other, and the thrill of being behind a company headed for success.
“Many people are drawn to the vision that a CEO has for a company and the excitement of being involved with something that’s going somewhere,” says Wilson. “Plus, they get to tap into the intellectual capital of other CEOs.”
What should I ask my advisers to do?
Ingredients of successful board meetings include:
- Good governance
- Giving all members an opportunity to voice their concerns and opinions
- Informing members of important company news in advance of meetings
- Preventing CEOs and chairpersons from dominating discussions
Rowley recommends starting each board meeting with an overview of the company’s business strategy and of the risks involved, including any changes that have occurred in these areas since the last board meeting. A board isn’t helpful if its members don’t know the full scope of what’s going on in your company. In terms of other content, anything relevant goes, from management issues on which the CEO needs advice to addressing investor concerns.
Set the agenda ahead of time and ensure each member reviews it so that meetings stay focused and every issue is addressed. Take minutes, even during informal board meetings, so that no valuable information or ideas are lost. Meet no less than once per quarter and bimonthly if your firm is a startup.
Note, however, that board members can also be productive outside the boardroom: ask an adviser with marketing expertise to help your VP marketing resolve a sales issue; take your directors to see your banker; ask them to introduce you to their contacts.
How do I measure my directors’ performance?
One idea is to create an adviser agreement that delineates each director’s role and responsibilities. This document not only provides goals a director can work towards, but also helps a chairperson or CEO identify and address poor performance.
And just as you would with Joe Employee, you should conduct annual performance reviews with your board members. If they aren’t meeting expectations, this is your chance to set them straight, if not relieve them of their duties.
Finally, be proud of your board and trumpet your advisers on your website and in communications with suppliers and customers. After all, your board members have the power to increase the presence and prestige of your company — and a little name-dropping never hurt anyone. With files from Laura Garetson