Does your business need a board of directors? Isn’t that just for big companies? If you’re looking for advice on what directions your company should take, couldn’t you just Google it?
There’s a wealth of good business information on the Internet. But you’re looking for more than advice from a board of directors. Google is not going to have a frank discussion with you if you’re taking your company down a perilous path, or even if you just need a boost of confidence that you are heading the right way.
The Small Business Administration points out that small businesses may need a board even more than a big company, particularly during times of rapid growth. Most small businesses don’t have all the skills in-house needed to operate effectively because they’re small with limited resources and budget.
A board of directors, or at the very least a less formal advisory board, can provide extra expertise such as:
- Manage expansion
- Develop and refine strategy
- Raise capital
- Plan an IPO
- Recruit talent and strategic partners
So what kind of people do you want on your board or you advisory council?
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Characteristics of Good Board Members
Someone who is genuinely interested in your business.
There are those who like to sit on boards as a way to burnish their resumes or to network, neither of which has anything to do with the success of your enterprise. A board member that is excited about your venture, even if they don’t necessarily have a deep background in your industry, share the same passion that inspired you to start your company in the first place.
As Greg McRay, writer for the Foundation Group, describes, “You must select people who share your sense of mission. If they do not care deeply about the very purpose of the organization, their value is minimal.”
They are not on a lot of other boards.
While having a member of your board who is also on the boards of other companies might be good from a networking standpoint, it’s not from a time standpoint. Being on a board requires time and attention.
The more boards someone is on, the less time and attention they will pay to your board and your company. The best situation here would be to have four or five board members who are each on another board, rather than someone who boasts of being on four or five other boards. That way you get the best of both worlds—extending your potential networking without sacrificing individual focus.
They are a lawyer, or a CPA or an MBA—Not necessarily.
We’re not saying lawyers or accountants or Wharton graduates don’t bring value to a board. Just they shouldn’t be considered simply because they are lawyers or accountants or graduates of any business school. That shouldn’t be their only credential. You’re looking for a number of qualities, not just one, in a board member.
Keep in mind what CauseVox points out, “You don’t want a board with only professionals, but having a few will ensure that your organization is successful, not just from an organizational perspective, but from administrative and regulatory perspectives, as well.”
They want to invest in your business—Well, maybe.
If you’re looking for venture capital funding, the investor requires that you have a board and, moreover, that the investor is a member. But let’s say you have a private individual or two interested in perhaps loaning money to or investing in the business. You have to weigh how much money they are offering to invest against whether they might think this entitles them to some special privileges or a larger say in running board matters or whether they think they can tell you what to do. Ideally, they should offer additional talents besides an open wallet.
They are not family members. Or even your best friends.
You really want you father-in-law on your board? Okay, maybe your father-in-law is a good guy who has himself run one or more successful businesses. He’d be the exception. In Creating the Future, Hildy Gottlieb notes that family and friends can actually hurt your future prospects.
“In the short term, stacking a board with friends and family will make it very difficult to attract unrelated board members—the kind that can really help move the organization forward. With every organization in town competing for good board members, your board will not be as attractive to those prospects as a board that is comprised of a broad spectrum of the community.”
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Provide your board with balanced diversity.
You want your workplace to reflect the racial, cultural and gender diversity of your community, and you want your board to do the same. In the final analysis, as EY emphasizes, it’s not because it’s the politically correct thing to do. It’s because it makes business better.
They have experience in running a business, have been “around the block” in raising capital and weathering economic cycles. This is particularly important if this is your first business start-up. Having an elder or two provides an important perspective to a younger generation that should know they don’t know quite everything, yet.
They understand they are not running your business for you. This is absolutely critical. Board members are there to help guide you, to offer advice and to provide the aforementioned perspective. They offer a bird’s eye view; you don’t want them pecking in your yard for worms.