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 protected]
or (215) 441-4600.