Why Your Company Needs a Board of Directors
Well-chosen boards, populated with seasoned executives from diverse industries, can bring extensive experience to help guide your ship. Board members can provide indispensable support by: analyzing your company’s direction and performance; identifying and developing top talent; navigating through tough times and competitive markets; knowing where to cut back and where to invest; understanding financial statements; and even connecting your business with outside resources for investment capital, strategic alliances and political influence.
Boards of directors are not just for large or public companies. If you own a small or midsized business, a board of directors can provide many of the benefits listed above – especially when the board is composed of business owners who understand how small businesses work.
A board of directors provides many advantages to a business. Some typical board responsibilities include:
- Hiring the chief executive officer
- Approving executive compensation plans
- Reviewing and advising on strategic decisions, such as raising capital or forming strategic alliances
- Challenging the thinking of the chief executive and his/her management team
- Holding the chief executive accountable for executing company plans and delivering on promises, including returns to shareholders
- Ensuring compliance with state, federal, and local laws
- Being stewards of the company’s image in the business and local/national community
- Reviewing and approving financial data and reporting (for fiduciary boards)
With small staffs and limited resources, the chief executive (oftentimes, the owner) of a small business is often working IN the business to make the sale, and possibly even to deliver goods and services to the customer, instead of working ON the business (setting direction, making plans, improving processes, etc.). In many instances, there is no one providing oversight, accountability, challenge or advice.
The answer for your business may be a peer advisory board composed of experienced business owners who face the same issues you do. Consider individuals from a range of industries and backgrounds: one business owner may work in a family-owned operation, continuing the tradition into a second or third generation. Another may have left a large corporation to start a small business, an experience through which they gained a wealth of knowledge about everything from accounting and finance to marketing and operations. Another may be an entrepreneur who started a business, grew it and sold it, or lost it and started over. All of these people would serve as valuable resources to help you learn.
This type of small-business peer advisory board can bring oversight, accountability, coupled with confidential objective advice without the politics and expensive honorarium or insurance costs of a large company’s board of directors. Plus, these board members can bring the empathy and understanding that only comes from being the owner of a small business, as they too deal with juggling work and life issues.
How do you put together a board of directors for your business? Consider the following steps:
- Draw up a charter defining your board’s responsibilities, operating rules, and limits of authority.
- Define the industries, skill sets, and personality types you’d like represented.
- Ask friends and business associates to recommend candidates who would be good sources of advice, and who might commit to participating. Search firms exist which will recruit board members for you, for a fee.
- Select a leader or board chairman who will design a meeting agenda, coordinate and facilitate meetings, and keep a record of outcomes and decisions.
Alternately, you can affiliate with an existing peer advisory group in your area. These take many forms, from issues-based roundtables to chamber- or college-sponsored programs to private member organizations. Some are focused on networking, others on training, and still others focus on issues resolution and follow a board of directors approach, as we do in The Alternative Board.
There is so much involved in running a successful business. Why try to do it all yourself when help is available right in your own community? Isn’t it time you considered looking at your business from a different angle?
Mark Komen, Mitch Olson, Rochelle Shirk and Dean Howard are franchise owners and certified facilitator/coaches for The Alternative Board® (TAB), an international organization that assembles groups of small- to midsize-business owners to act as advisory boards of directors for each other and to provide peer advice and coaching. TAB Twin Cities currently operates 12 TAB boards with more than 80 member companies in the Minneapolis-St. Paul metropolitan area. Over 3,000 companies are TAB members worldwide. TAB’s website is www.thealternativeboard.com.
Copyright 2011. Mark Komen, Mitch Olson, Rochelle Shirk, Dean Howard. All rights reserved worldwide.