Do you have the right board?

Boards of directors don’t work for everyone. Some people need them, some have to have them due to external investment conditions and others should steer clear of them. Too many businesses have the wrong makeup in their board and others have boards but don’t know how to productively use them. If you are going to have a board, or if you must have one due to an agreement with investors, then you should create one which is good value for money.

We hear too often of boards which are rubber stamps to the beck and call of the founder or major shareholder. Clearly, the directors are getting their fees but the shareholders are not getting value for those fees. I have had directors imposed on me by investors who didn’t understand my business, failed to provide any useful insights and simple took up space. Those you can do without.

If you want a rubber stamp to satisfy an external investor, it is quite easy to build one, but are you not being deceptive to your shareholders? Where are the insightful comments, industry knowledge, network connections and independent advice? Instead of wasting the money on a useless board, why not take the opportunity of building a board which can help you be more successful.

Boards do have responsibilities imposed on them through legislation and regulations but they can be much more useful than just undertaking governance and reporting back to the shareholders. A board should be constructed so that it provides input into the longer-term strategy of the business, brings skills and knowledge which are difficult to acquire or provides insight into challenges facing the business. You want a Board which works with you to build the business and not one which is so risk averse that it stifles initiative and growth.

If you get to choose who is on your board, take the opportunity of working out what experience you want to bring to the business. If a board member is imposed upon you by an investor, discuss with the investor the type of person who could satisfy the oversight needs of the investor but also contribute to the success of the business. Since you are going to pay the director’s fee anyway, at least you should look to get something for your fee other than a warm chair.

You need to construct a board which not only can work together for the common good, but also encompasses the knowledge and skills which you need to tap into. Don’t confuse payment for professional advice with the role of a board member. Lawyers and accountants can be hired but wisdom usually can’t be. Many experienced industry professionals like to have a mentoring role but you need to offer them more than just a director’s fee. They want to be part of something interesting and feel they are making a contribution. You should be looking for such individuals for your board, people who want to make a difference but you need to listen to them and be prepared to account for your actions.