A CEO friend of mine recently asked if he should appoint a Board of Directors for his company. He started his business about six years ago and still retains 100% control. Now as his business approaches $10 million in annual sales he feels the need for some independent advice that his managers are not able or willing to give him.
My recommendation: Absolutely
His forward thinking and willingness to be open about bringing in outside advisors as his business grows impressed me. The reality is that a $10 million business is much different than a startup, especially for the CEO. Speaking from experience as your business grows and gets more complicated you will spend more time dealing with the minutia of running a larger company and will have less time to strategize and think “big”. Forcing yourself to spend time with a board on higher-level discussions will be benefit you.
Making the Argument in Favor of a Board
A good Board can be a helpful partner to a CEO and the business in three key ways:
1. Provides additional skill sets for the CEO and the senior management team to tap into. This could include legal, investment, governance and host of other talents not sitting inside the company at present.
2. Provides strategic and sober feedback on the company operations and direction that is often missing in senior management discussions.
3. Provides credibility of the organization to its employees, investors/financers, vendors and customers that the CEO has been thoughtful about building a solid organization.
These are great reasons for having a board and they trump some of the misgivings I have heard about why not to have a board - which usually include time, financial cost, and loss of control.
Choosing the Right Board Type and Members
Over the past thirty years I have been privileged to sit on several profit and non-profit boards. The great boards I was part of were ones that understood the mission and strategic goals of the organization and helped to mentor the organization’s chief executive. The board, the organization, and the executive were all in harmony on where we were headed. In each of those boards a lot of time was invested in governance meetings building board matrixes that matched up candidates to what the board needed.
Most of the boards that I served on were mandated due to the organization’s charter or a State legal requirement. However as an entrepreneur/CEO I found that the best boards for smaller organizations are non-voting advisory Boards with at least one Board member who acted as a mentor.
For smaller CEO owned companies I recommend an Advisory Board
An Advisory Board is less formal and is non-voting. The members and the CEO meet in a more relaxed atmosphere where the CEO can use the members as a sounding board for ideas and strategies without having to get a vote on a resolution. Most members are un-paid other than a small honorarium and feel privileged to be part of a small dynamic group. In one of my past Advisory Boards we would meet quarterly at a nice restaurant for a couple of hours and spend time with the CEO discussing whatever she wanted to talk about. We were also always available for a call between the epicurean themed meetings. For a relatively small financial and time investment this paid huge returns.
I use four criteria when selecting members for an advisory board:
1. Board members who are financially independent from the company and have no family connections to the business. This makes for much cleaner governance and discussions.
2. Board members who have prior C-Level experience that have had to meet a weekly payroll and have high emotional intelligence (EQ)
3. Board members that bring additional skill sets to the board such as legal or high level HR experience.
4. Board members who are honest and aren’t afraid to voice their opinions in their feedback to the executive and group.
How About A Mentor?
Having a board and a mentor are not mutually exclusive. In fact access to a mentor has been a critical part of my business success over the years. For the past several years my key mentor wasn't even part of my board. In his book “The Hard Thing about Hard Things” author Ben Horowitz describes the ideal mentor friend:
“No matter who you are, you need two kinds of friends in your life. The first kind is one you can call when something good happens, and you need someone who will be excited for you. Not a fake excitement veiling envy, but a real excitement. You need someone who will actually be more excited for you than he would be if it had happened to him. The second kind of friend is somebody you can call when things go horribly wrong—when your life is on the line and you only have one phone call.”
That second call will need to be made at some point in your career and you need that lifeline. I used my mentor several times in the past years for that second call as we were building our business and facing challenges from several different avenues. My mentor was a great emotional empath that allowed me to leave our meetings feeling recharged and positive.
I strongly recommend that every CEO embrace their board to maximize its usefulness and to find that board member or friend that can be a mentor when things get really tough. The CEO role does not have to be one of isolationism.
For more information on board building please give us a call at (207) 846 5403 or contact us through our website at www.aventuremgt.com.
Darrell Pardy, CA CPA
 Ben Horowitz “The Hard Thing About Hard Things” Harper Collins 2014