How to Build A Better Board of Directors
Taking the time to work “on” your business to ensure that you are going in the right direction is better than only working “in” your business to find out later that you’re going the wrong direction.
Business owners know this well, which is why a Board of Directors is responsible for setting the overall direction and strategies for the business’ growth. But more than that, the competence of the board to constantly provide the wisest decisions for the business is a much needed scrutiny for any scaleup or SMEs who would like to take their business to experience sustained growth.
Why it’s important to evaluate your Board of Directors
Your current Board of Directors won’t be perfect for every stage the business will undergo. At some point, while the business is growing and new challenges arise, the boardroom may lack certain expertise that was not needed before. Each board member’s priorities and vision for the business may also change as time goes by, which can affect the synergy in the boardroom.
If this isn’t addressed early on, it could spell trouble for the company’s long-term growth. A Board of Directors lacking much-needed expertise can cause strain and lead to poor decisions that could negatively affect the business in the future.
Before irreparable mistakes are made, look at how you can improve and build a better set of advisors for your company.
The make-up of a perfect Board of Directors
Setting a standard for a “perfect board” can guide you in evaluating your existing board members. Here are important factors that contribute to an ideal Board of Directors.
Mutual understanding of the business mission and vision
The Board of Directors all have to be on the same page. They don’t need to have the same opinions or ideas, but they all need to be aligned with the identity of the business, especially its mission and vision.
This maintains a strong culture of trust and respect among the board because, despite the varying opinions, they know that they are all working towards a similar goal. Opposing interpretations, on the other hand, can cause division and uncertainty.
Clear composition and structure
Each director in the company should have a role and set of responsibilities that contribute to the whole business. A clear delineation of what each board member’s role is can ensure that all the bases of the business are covered. This allows proper and streamlined reporting of matters as well because members of the company know who’s in charge of what.
Moreover, when each director has a specific purpose, having too many members on the board can be avoided. An unnecessarily large Board of Directors can be costly and less efficient.
Balanced set of skills and expertise
The Board of Directors should be able to complement each other. While each of them may be experts, the knowledge they lack must be fulfilled by another. It will vary from business to business, but there should be an effective mix of skills and expertise on the board. This is important to avoid knowledge and experience gaps when discussing the business’s objectives, challenges, and strategies.
Diversified backgrounds
Seeing all perspectives is crucial to decision-making. Having an adept group of people that come from different backgrounds — may it be gender, industry, years of experience, or other factors relevant to your business — can be beneficial to gaining varying opinions.
This is where insider and outsider perspectives come in too; thus, the board could benefit from having members that are not directly connected to the business. Although the board will eventually need to come to a consensus, the collection of different perspectives can push the group to think thoroughly and delve deeper first before making a decision.
How to start building your perfect Board of Directors
1. Identify what your board is lacking. From reading what makes up a perfect board to actually looking at your own Board of Directors — ask yourself if you are meeting the standard and ticking the boxes. A comprehensive study of your board will help you see what needs to be done. If you need to consider getting new directors, you must first have a definite idea of what you are looking for.
2. Look outside your network. If your Board of Directors is the one you had at the beginning stages of your business, it’s likely composed of the founders, investors, or other qualified people from your close network.
Being an established business, you now have the capability to expand and look for experts beyond your current network. To grow further and get to the next level, you’ll need to go out of your comfort zone and find someone with a fresher perspective for your business.
3. Consider getting part-time board advisors. Finding the perfect full-time director for your board can be time-consuming, risky and expensive. Your business may need a director with specific skills but they may not need them full-time, this is very common for scale-ups and SMEs as they grow and evolve.
Part-time executive directors or board advisors are an affordable option, but at the same time, highly valuable. Since the advisor is only with you for a certain period of time, the top-quality advice that your business and existing board can get is that which is targeted to your needs. It’s also a more convenient way for you to switch up the expertise you have on your board, since there is no long-term commitment contracted.
