How to make your board work better
Do you look forward to your board meetings? Are they insightful, productive, and inspiring? Or are they more of a distracting obligation?
Your board should be your greatest asset. If not, you need to take responsibility for it, and then act to transform it. By following these recommendations, you will create and unleash an asset that will better serve your shareholders, executive team, company, and career.
First of all, the composition of your board needs to reflect the company that you want to become and not the company that you are or once were. For example, if you are striving to transform your company into a multinational, your board should be comprised of a mix of people who collectively possess the needed range and depth of perspective, experience, and professional contacts to do so.
Secondly, board membership needs be viewed as analogous to a relay race, but too often it is viewed more like academic tenure. Different skill sets are required to take your company from zero to $1 million, from $1 million to $10 million, from $10 million to $100 million, and so on. Or from a distribution to a product company. Or, once again, from a domestic to a multinational company. Welcome all growing pains and adjust accordingly. Your board needs to view its expected handing off of the baton as a great milestone achievement for them and a confirmation of a relay race stage well run.
Thirdly, your board needs to be one that works and is held accountable. Too often board meetings are an exercise in “pop in” governance in which management tries to prove to the directors that it is executing as well as is possible, while in turn the directors try to prove to management and each other that they actually add value to the discussion. Although governance is an important function, it is also only a small fraction of what your board is capable of contributing.
Instead your board needs to be actively engaged in true corporate development. While you are focused on effectively executing the agreed upon strategy and delivering the expected operating results, who is thinking about the best outcome for your investors, such as a liquidity event? Who is actively developing the pipeline of potential acquirers? Who is thinking about how to achieve and maintain a readiness for a strong valuation? Who is thinking about how to avoid any operational decisions that will complicate a future due diligence process or ensuring that you will have timely access to the necessary flow of capital? Or opening up executive-level doors for your company as you pursue business development opportunities? (You are not trying to do all of this yourself, are you?)
Having a working board means that your directors are actively contributing value between meetings and in areas that you the need the most help with. And it means that during a board meeting your directors are also reporting on the achievement of their corporate development goals. In other words, all parties are contributing to shareholder value and are accountable to each other for doing so.
Fourthly, if you want to attract the best of the best to your working board, compensate your board members accordingly. I am not referring to insiders or investor representatives who are already compensated elsewhere, but to independent directors whom you need to attract in order to build the company that you envision.
Highly successful people think about opportunity cost. If you want to secure the services of highly engaged, experienced, skilled, and connected directors, do not approach them as if you neither understand nor respect the value of what you are asking them for, as if you are somehow entitled to their pro bono support. Instead, appreciate that you are competing against alternative uses for their valuable time and effort, and act accordingly.
In business, most people do not properly value what they do not properly pay for. As a rule, include a material cash component in any independent director package because “cash is king” and reflects the priority and value that you place on having a truly productive, working board. If you do not, then what caliber of independent director do you expect to attract?
And lastly, properly manage your board! Think of your working board as a new sports car that requires skill and attention to extract the performance it is capable of delivering. Fully exploit the opportunity presented to you by this collection of talent, experience, and connections. A thoughtfully composed and managed board provides an opportunity for you to listen, learn, lead, challenge, enjoy, and thrive. If you are willing to invest the necessary time, effort, and resources to create and maintain a truly productive, contributory board, you will improve your odds of a successful outcome for your investors, company, and career.
And isn’t that what you really want?
David Guinther is a Madison-based turnaround specialist, management consultant, and executive coach with decades of industry expertise in technology, medical, and consumer goods.
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