Friday, July 2, 2010

Do you need a board of directors?

If you are not a corporation and required to have some sort of board, you may be wondering why anyone would even ask this question. After all, a board of directors represents the shareholders, and if you are a sole proprietor, you are the shareholder. If you are in a partnership, you and the other partners are the shareholders. It makes sense that you don’t need anyone else to look after shareholder (your) interests.

Or does it?

A board is . . .
A board is the governing body of a corporation. It is responsible to the owners of the corporation. It hires and fires the CEO and sometimes other officers. It sets policy and direction. Board members are supposed to be selected on the basis of their skills, experience, knowledge, or some other strength. No single board member is expected to be an expert in everything, but their strengths should complement each other. The board should be a moderating influence when necessary, and it should lead the corporation in new directions when necessary.

At this point, business owners are saying, “But that is my job!” They are right, and strictly speaking there is no need for a board to represent the owners and to direct management when the owners and management are the same. However, it might be good for business owners to learn the lesson that writers learn when they are first learning their craft. It is not a good idea to try to edit your own work. It is always a good idea to find a source of independent feedback so that you do not end up breathing your own exhaust. This is a term that refers to getting caught up in your own world view so that you lose sight of other ideas or approaches. The sad truth is that we are often not very honest critics. We either give ourselves a pass on opportunities for improvement, or we downplay our strengths. One approach that many businesses use to find an independent voice is to hire consultants. The consultant approach may be good for specific problems. However for ongoing advice, it makes sense to find a more permanent solution. That is where the a board comes into the picture.

While the role of the board may formally be all about policy and direction, effective boards are also advisory bodies. Wise CEOs take advantage of the accumulated expertise of their companies’ boards. Large partnerships are able to do the same thing because the partners often bring multiple skills and experiences to the firm. Not-for-profit organizations do the same thing. Sole proprietors and small partnerships however, do not typically have boards. Skill, knowledge, and expertise are limited to the owner or the partner or employees hired for certain tasks. What if something is missing? It is beginning to sound like a good idea to have a board or a team of advisors.

A board is not . . .
Having a board is not the same as hiring professionals to perform specific functions for your business. Your board will not take the place of your attorney or your CPA. Your board’s risk management advice will not be a substitute for a good relationship with a trusted insurance agent. However, your board may be able to help you in ways that these professionals cannot.

How to create a board
Your objective is to find a source of guidance, and you hope to be able to create a team of people willing to help you lead your business.

This is something more than just a group from the civic club or business networking group, but it does not have to be much more. Your objective is to find a group of people with skills or knowledge that are willing to help contribute to your success. It is easier to do this than you might think. The most anticipated hurdle to overcome is your own thinking that there is not anyone out there that would want to do this, or if there are people that want to do this, then they will charge dearly for their time. Good news. While there are people who make their living as consultants that will charge you dearly, there are just as many people that will help you without sending you a bill. The key is in understanding why they might want to help you build your business.
People will agree to help you for several reasons. The first is simple self interest. Your success will contribute to the economic growth of the entire local business community. If they help you, and your business grows, then their business will probably grow also. In addition, when you are ask other people for help because of their skills or expertise, they realize that you are likely to reciprocate. Another reason is altruism. Many people, particularly those who have been successful in life, enjoy helping other people become successful. One potent example of this is SCORE which has 12,400 volunteers with experience in over 600 business skills.. This is a group that shares its accumulated experience with small businesses. They do it simply because they can and because people need the help.
If you are trying to grow your business, seriously consider forming a board.

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