So you have a nice boardroom, now you have to make good use of it.
Do you really need a board of directors?
You might be deciding whether it would be a nice idea to have a board of directors, or you might have just sacked the old one because of poor performance.
The big question to resolve is, therefore, do you really need a Board of Directors and all the issues that go with them?
Not every business has a board of directors. Corporations are required to select a board of directors to oversee the company, but other types of businesses are not required to have board members. That being said, it’s always a good idea to get good, knowledgeable people to help you get started and run your business.
Your board members will help you make decisions and also satisfy the requirements of the state in which you are incorporating. Here are some things to think about before you select board members.
How many board members should there be?
First, select an uneven number of board members, to avoid ties. The number of board members depends on the size and complexity of the organisation. For a small organisation, three to seven people are plenty. For a larger, more complex, organisation with several committees, you might want 9 to 11 people at a minimum.
“The challenge of leadership is to be strong, but not rude; be kind, but not weak; be bold, but not bully; be thoughtful, but not lazy; be humble, but not timid; be proud, but not arrogant; have humour but without folly”. Jim Rohn
You need enough people on your board so that, if several people are not present, you can still have enough to make a decision, and for a quorum. But too many board members can slow down any meetings along with your progress.
What are the attributes of a good board member?
When you are recruiting board members, take the time to look for these characteristics:
- Expertise in a specific area which can help your organisation. Make sure you have a good mix of skills that cover the important areas of operation.
- Leadership and management experience, especially in related businesses. For example, if your business is in a technical area like computers, you should have people who do business in that area. They know others who can help you, and they understand the specifics of the management and operation of the business.
- Commitment to the business. Board members must be interested in the business and its continued well-being. They should not be serving just for the money or for personal interests. Often you might not have to pay board members for their time, but you should pick up their expenses associated with the business.
- Time and energy to devote to board duties. Board members will be expected to spend time preparing for and attending board meetings and to serve on additional committees while following up and doing what they agree to do. They should be expected to maintain minimum attendance levels.
- Integrity and lack of a conflict of interest. Board members will need to sign a conflict of interest statement and they must act in the best interest of the business, not their own individual or business interests. For example, a board member who profits from their service on a board of directors may put the entire organisation in jeopardy.
- Marketing expertise. It is always important for board members to have a level of marketplace knowledge and an understanding of modern marketing practices.
- Technology is playing an increasingly important role and every board member should be required to have a minimum level of competence, at least to network with other board members. An understanding of the basics of cloud computing, mobility, social media, content marketing and emailing should be a minimum requirement.
- Ability to raise money for the organisation. Particularly for non-profits, you can have a big advantage if you select one or more board members who have experience in capital raising.
Who not to select for your board of directors
- Don’t select someone just because they are a friend or relative.
- Don’t select someone who hasn’t been checked out thoroughly. Do a background check, get references.
- Don’t select anyone who has a conflict of interest or a potential conflict of interest.
Of course, each type of small business needs specific kinds of people to serve on its board of directors. But all businesses need individuals with integrity, commitment, and interest as board members.
Governance issues should be a high priority of each board member as it is critical to success. Think of corporate governance as a system of rules, principles and processes by which your organisation is directed and controlled. They are guidelines as to how you can fulfil your purpose, vision and objectives while enhancing customer value.
Corporate governance provides a framework for balancing the expectations and interests of the many stakeholders in your organisation. Stakeholders might include your family, customers, employees and volunteers, management, committees, suppliers, financial institutions, government, the community along with the shareholders and the board of directors.
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Just like the number and diversity of business opportunities available today has never been greater, so have the challenges of running a business or non-profit organisation successfully and profitably.
Companies, despite their best efforts, sometimes end up taking the wrong decisions. Having a Board of Directors is one way of improving problem-solving, decision-making, exploiting opportunities and having innovation as a top priority.
Something to be avoided is having a board of directors that overloads the CEO without the necessary time and resources to accomplish everything.