How to Build a Strong Board of Directors
An organization’s board of directors should be one of its most important resources: a check and balance, a shareholders’ advocate, and a source of top-notch business expertise and candid feedback for management. However, developing a board that truly adds value is not an easy task; it takes keen self-examination and planning on the part of senior leadership.
Usually, a discussion of potential board members starts and ends with a scribbled list of the CEO’s friends and acquaintances that would be willing to serve. These people may very well be excellent candidates, but the right first step involves identifying exactly what the organization needs from its board members.
Just as a house shouldn’t be built without a blueprint, a solid board of directors can’t be built without a plan – especially since these directors could be making or influencing potentially million-dollar (or more) decisions.
Decide what you're building
Depending on your organization’s needs, you may not need a formal board of directors. Particularly for smaller start-ups, an advisory board may be a better solution. Advisory boards, which are generally selected and headed by the CEO, do not have fiduciary responsibility and may have less liability and influence over an organization’s direction. However, they can still provide extremely valuable counsel for a budding company. Later, if the organization becomes larger and more complex, you may want to transition to a formal statutory board.
Whether your board is advisory or statutory, begin by outlining what you want the board to contribute to your organization – your blueprint. Write down the board’s purpose, goals, and the type of expertise needed, along with an overview of your organization’s issues and challenges. Only then can you begin to fill in the blanks with the kinds of people right for your board.
Every director is a strategy
With a limited number of seats on the board, each person sitting at the table should be there because he or she brings critical strategic expertise to the organization. In addition, you may want directors to have experience in certain industries, other board experience, or a particular level of financial acumen.
Beyond professional skills, consider what personal qualities are important for a director to fulfill his or her responsibilities to the organization. For example, someone who is afraid to rock the boat may not be able to ask the tough questions; someone who has an abrasive personality could polarize the board.
With all these factors to consider, it’s often easier to visualize your needs with a spreadsheet listing the desired qualities along the left side column and your candidates along the top row. Rank each candidate based on his or her strength in each of the particular desired qualities or skills, and you’ll quickly see who stacks up best.
Where do good directors come from?
Once you’ve identified the particular needs and skill sets important to a strong board, you’ll naturally begin to think of people who might fit those criteria. But don’t limit yourself to only the people you know. In fact, people you already know can be some of the worst director candidates for various reasons.
Employees are generally not good board candidates because their input and counsel will be influenced by their stature within the organization, making it difficult for them to act independently and ask probing questions of the CEO or senior management. Consultants such as the firm’s attorney, CPA or other advisors have an inherent conflict of interest because they have their own business agenda for the organization. Directors who are on too many boards may not have the time to delve deeply into yet another organization’s issues. And friends, while appreciated, would give you their advice anyway and may not be objective enough to question management.
That rules out a lot of people you already know, so fire up your network and ask colleagues, friends and others whom they can think of that may meet your criteria. Aim high. Even national experts may not be out of reach if you approach them with the ability to make a critical difference to a good organization, respect their time, and appreciate their input.
Building a strong board does take planning and time – but if you hope to create a sound structure that will support your organization’s progress toward your long-term goals, there’s no substitute for creating a blueprint for the ideal board first.
For more information about board member selection, contact Marjorie Engle using the information below.
Senior Vice President
Organizational Development and Family Business Services
Marjorie Engle guides clients and their companies through executive coaching, transition and succession planning, organizational analysis, conflict management, and corporate strategy development. A specialist in assessing and developing family councils, advisory boards and boards of directors, she has extensive experience with family-owned, closely held, and public companies across many industries, as well as with not-for-profit organizations.
Engle serves as associate director of the Kansas Family Business Forum, hosted by Wichita State University’s Center for Entrepreneurship. She holds a certificate in Family Business Advising with Fellow Status from The Family Firm Institute, is a certified coach with Family Business Partners, and a certified Change Leader.