How and when should I set up a board for my company?
It has been five years since I started my company and I do not have a board to help in the running of the company and improve in-house decision making. When should I set up a board and who should I bring on? What has worked for others?
You need a board ASAP it will take the load off of you 3 inside the company and 2 outside the company.
A board is a decision that you make when you feel the need for help. If you are comfortable with your management team and their assistance then keep going. If you need business connections that can help you expand because your management team doesn't have the connections, then get the board started.
Paul, I would setup an Advisory Board of confidantes and close allies who are willing to give you guidance and advice as you grow your business. If you are looking for investment moneis and/or an Equity Partner, I suggest you create a Board that is comprised of Founders, early Investors (Angels) and Executives within the company!
As a secretary for a non-profit, you should have president, a vice president that will supervise various areas with a secretary and a treasurer to manage the money. You will also need directors that will work with the vice presidents, and once your year is done, you begin nominations and appoint yourself as a chair person of the board, just with a new leader to guide.
Paul, congratulations on running your business for 5+ years. The fact that you are thinking about a board tells me you are doing well as a business to be even able to think about things like boards and not about company survival, revenue and other issues.
Identify your weaknesses or holes and find experts/advisors to help plug those holes. You don't need a formal board. A board of advisors can work well. Trust and communication is key with these individuals. Find people you would listen to and those who will have valuable things to say.
It's never too early to create an advisory board. I suggest to board be made up of a sales/marketing executive, an operations executive, a financial executive, and perhaps an attorney. A lot depends on what expertise you lack, but a well rounded advisory board can bring experience you might not otherwise be able to afford on a full-time basis.
Thank you for braving this question! I'm also 5 years in and feel overwhelmed with the building of a board! Looking forward to the advice. Thanks, Paul.
Dear Paul. This is not a simple decision , dependant on the timeline or otherwise a "need to do" task. You can keep a company for centuries without a board.
A board is necessary if your company "goes public" or if you need to delegate responsibility or if you are "stuck" and need "fresh blood" to restart.
If you decide to appoint a board then the personnae has to be fitting accordingly to your aspirations and the companys goals or else the will be of a hinder.
It depends on the state of your company now..
Board will helps you take care of some areas, but too many hand cooking the same food will ruin the food.
Choose the area that most "need help", try to make a clear segregation and start to build your board base on your company's need.
There is no late or too early,..it fully depends on your company state.
check the local regulation in your area, consider the requirement in setting up a board for your company and apply expert advise given here. You can not underestimate the value having a board would offer particularly in area of decision making, enhanced company profile and risk assessment from professionals with wealth of experience in areas surrounding your business type.
1. Define your business structure (e.g., Private Corporation or Public Corporation for profit or non profit)
2. If your business structure is a Private or Public Corporation you want to consider having a board of directors. For Profit Corporations normally only require 1 individual to be the president, v. president, and secretary in most states. However Non Profit organizations can be structured the same but will not be effective when applying for a 501c3. It would be a best practice to have at least 5 or 6 board members for Non-Profit with skills such as CPA, Lawyer, Government, Community Organizations, etc.
3. If your company is not a corporation you want to perhaps consider developing an organizational structure that has the expertise suitable to your business needs such as Marketing, Finance, Business Development and Contracting, Vendor Relationships, Social Media, IT, Web Development, Human Resources, etc.
Aim for the best!
Start with advisors before moving on the Board of Directors to be part of the decision making process. This means, you prevent losing control of your company and risk a descent.
The role of a group of advisors you engage would be to advise you, to help you make the decisions at strategic and policy levels. This would be an improvement in how you make decisions and run your company for now in the sense that you have an outside perspective and better rounded information. The folks you appoint as your advisors should be from different areas of expertise than yourself, from different interest areas within the spectrum of business.
The ones that help you best from this group can eventually be members of your eventual Board of Directors, based on how much you can trust and rely on their inputs and thought processes.
Subsequently, you can then establish a Board of Directors, comprising of both the advisors who have acted in that capacity and persons who have proven their mettle as leading heads of successfully established organisations (in capacities of MD, CEO, COO, CTO, etc.). I were you, I'd remain the chair.
In terms of comp, as with a board of Director, you need to establish a fee for advisors up front. However, the fee for an advisor does not need to be what you'd need to compensate a Director with, because of lesser responsibilities.
This is a slower and more tedious a route, relatively in comparison to setting up a Board of Directors immediately. Have you ever heard of the adage, "Slow of and steady wins the race"?
The best boards are formed from competitors' directors and CEOs. Surprisingly there are not formed from friends or allies but from businesses that stand to gain if you fail. The best time to get these people on board is when your company is dominant in one or more aspects that affect your industry.
Immediatelyt. How it is structured will depend on the regulations pertaining to and governing companys in Kenya which is where you are at.
As far as people are concerned You would need people who have experience in finance, governance, strategy and some experience in the products or services your company offers.
The followihng link gives some information about a boards functions:
I am on four Boards in Australia.
I feel some of the answers have missed the point. Whether it is required by law or public listing, generally done or not done in your industry is far less important than asking the question, could I benefit from the counsel provided by 'wise heads"?
Equally, it is not important, at least initially, regarding paid or unpaid Directors. Like everything in life, the more one pays, up to a point, the better the quality and experience.
Almost certainly after five years, the answer to the wise heads question is yes.
But for goodness sake dont surround the Board table with people that are industry experts like yourself. In setting up a Board, the more varied experience and diversity one can put together the better. I often see a, say, manufacturing company looking for a Board member with manufacturing experience. Assuming the CEO, Chair, CFO and senior exec have this experience, why on earth have another the same ! In other words ensure that the Board is chock full of every skill you feel you need right now and in the medium term. Remember of course that Board members, in the main, oversee strategy, legal, compliance and the like and should not get involved in day to day operations.
Hope that helps and I concede that I am not an expert in USA Board structures.
Hi Paul -
I'm struck by "to help in the running of the company and improve in-house decision making." Why do you think a board is the answer to this need?
I don't dispute the value of an advisory board if your need is greatest around overall business strategy, financial oversight, and introductions.
But what you wrote has me thinking you may need another senior exec or "co-conspirator" with skills complementary to your own. This person would then offload some of the work you're now doing, so you can focus more time on strategy, sales, product development.
What problem are you looking to solve?
Depends mostly on what kind of overview help from a Board you need. Most Boards give advice based upon business plans and overall company performance. I do not know what size you are, but as soon as you start to make real money with positive cash flows, a Board selection is in order...
Whether you have a publicly traded company or not, it could be the time to have a Board created. Outsiders can bring ideas and corrections to the development of a company. The key is selecting the right people for the Board.
I always tell my clients that there are 4 people who are most important in regards to keeping close contact with. They are your banker, your insurance broker, your accountant, and your lawyer. Altogether you get (B.A.I.L). I highly advise to have all 4 on your board. Whether or not you pay them is completely up to you and them.
It really depends on the type of company regarding your board.
Corporations (C Corp, S Corp, or non-profit) are required by state law to have a Board of Directors, the number of board members depends on the state in which the company is incorporated. Many states only require 1 board member. Even with a Board of Directors in place, many corporations have advisory boards as well.
Other entities (LLC, partnership, sole proprietorship) do not require a Board of Directors. You can set up an Advisory Board instead.
Whether or not you are required to have a Board of Directors or are only required to have a single Board member, bringing on other Board members or advisors can be beneficial. Look for people with: experience in your market(s), connections that can help grow your business, related technical expertise, entrepreneurial success with a similar business.