Is Your Company Ready for a Board?

Written by on November 3, 2014 in Board Role and Duties with 2 Comments

Black and white photo of beach sceneWhen is Your Company Ready for a Board of Directors?

Hint: don’t wait until the stock exchange, or an outside investor, tells you.

An investment offer, a family transition, a market-quake, a new opportunity — these are great moments to review how your business is governed.

But let’s pretend you were about to list on the exchange, or were negotiating with an outside investor who will put in the money you need to make your dreams for the business come true.  What would a board contribute?

1: Strategic view and purpose.  A good board would have the habit of looking at your business from a 40-paces perspective, and measuring its performance against agreed goals.  By staying clear of the day-to-day distractions, it would spot where you could be blindsided or outflanked, or missing opportunities.  It would be planning for the next stage of growth, not the last one.

2: Governance.  A good board would insist on having, knowing and reviewing the processes and information flows that would allow it to spot issues before they become problems, and deal with problems before they become disasters.  A good board would be vigilant about keeping the company on the right side of the rules, public expectations, and the break-even point.

3: Risk management.  A good board would watch the risk environment and risk appetite of the business, and ensure that unproductive risks are minimised, and risks taken for the sake of opportunity are deliberate, measured and appropriate.  Risk management is not the same as risk avoidance; risk is the price of opportunity.

4. Appointing and monitoring the chief executive.  A good board is the custodian of your interests as a shareholder, and of course equally for any other shareholder.  On behalf of all shareholders, a good board will hold management to account, through the chief executive,  for strategy and performance, governance, and risk management.

But hold on: why wait?  If those are the benefits of a good board, why put them off until you have to have them?  Hey, if you’re ready for these, aren’t you ready for a board?

There’s a price  to pay, sure.  There’s always a price to pay.  You may have to leave behind some of the thinking that got you where you are.  The way decisions are made will change.  You may have to share responsibility, including responsibility for your own performance in leading the business.  You may have to take some of that gut instinct and express it in ways other people can work with.  Perhaps they will disagree.  Growth only happens outside the comfort zone.

It used to be assumed that size was the trigger: as a company grows, it gets maybe an advisory board, and eventually a formal board with some independent directors.  But I think being ready for a board is about attitude and ambition.  The smallest business will grow faster and with less expensive mistakes if it gets those four benefits from the very start.  If you have ambitions for your company, get a board!  Even if it’s just the executive team or the family shareholders, at least you’ll meet with a different, big-picture agenda.  And right then, an outsider can help you with clarity and discipline.

So: maybe your company is ready for a board of directors — but are you?

 

Here’s more on the job a good board does:  The 5.5 Core Board Tasks.



Print Friendly, PDF & Email

Subscribe

If you enjoyed this article, subscribe now to receive more just like it.

Subscribe via RSS Feed Google Plus LinkedIn Profile

2 Reader Comments

Trackback URL Comments RSS Feed

  1. Peter Moore says:

    Good work Iain.

  2. Iain says:

    Thanks Peter.

Leave a Reply

Your email address will not be published. Required fields are marked *

Top