One of the topics that we most commonly gets asked by scaling companies is ‘Do I need a Board of Directors?’ or ‘How do I build a Board of Directors?’
The short answer to the first question: it depends. But if you are growing and have ambitions to engage with larger clients, and investors, it is highly advisable that you create a board for your company.
While the idea of board meetings in themselves may not be hugely exciting, the functions and role of the right board members can make a material difference to your business.
Here’s what a Board of Directors can do for you and your business:
• First, and personally most important, a good board can bring game-changing advisory benefits. Don’t aim to build the most prestigious board, but rather the most practical team for the business. I think of good Boards like a team of mentors - ideally experienced practitioners with varied backgrounds, and from different sectors. Group-think is a real problem in small business - the sub-conscious bias that ‘you are right and the market is wrong’ can kill a business quicker than a pandemic, and you need objective advice to counter that thinking. The constituents of the board can vary of course, but you are looking to creating a dynamic group of people with independent opinions, that you know will consistently provide sound advice and guidance to the business.
• Second is the more traditional role associated with boards - governance and oversight. While many entrepreneurs are building businesses that are looking to disrupt the status quo, it’s worthwhile remembering that your clients and any future investors are still part of that system which places great value on evidence of governance procedures and auditable processes. This is particularly important when working in regulated sectors.
• Finally, the right board will not only be a reactive board, but will be proactive ambassador for your company. The ‘career board’ member might seem a safe bet, but if they are not contributing to expanding your network, and offering to leverage their contacts for the benefit of your business, then you’re probably better off finding someone else. This also means that you have to be able to ‘sell’ your vision to the potential candidate, as the good board members are in high demand.
So how do build a Board of Directors?
There are two paths you can take here: one is DIY and the other is to enlist the help of a search firm. If you have a good network or a very compelling business story that’s already attracting attention, you may be able to build a board on your own. But if this is not the case, then enlisting the help of a search firm can be worthwhile. At a recent ELITE Growth Lab our speakers Sheffield Haworth illustrated that the outsourcing the process provides a great deal of objectivity to the selection of board members. If you define the criteria, and let them bring you candidates you are less likely to be swayed by your subconscious bias and fill the room with like-minded people. You’re more likely to end up with a diverse Board, in every sense of the word.
Finally it’s worth noting that establishing a Board forces you to take a step back and examine the direction, the vision, the mission of your business, because you are creating a structure in which you have a higher-power to be accountable to. While that may sound counter intuitive as the owner/CEO of the business, it’s ultimately very powerful. Strategy, growth and success are a team sport- it’s almost impossible to achieve it alone. As you scale your business you will need the counsel of someone who has been there before and can spot the pitfalls, and opportunities that you might miss. Ultimately it demands you make time to work ON the business, and that is always a good thing.