As the new CEO and President of ACG Boston, I find myself pondering a key question that every business owner should consider… How best to build a productive and valuable board of directors for my company or organization? To that end, I want to share a recent anecdote that provides an insightful lens to the challenge of building a highly functioning board of directors.
Since this question is top of mind, I worked it into a cocktail conversation I was having with Emily Green, the CEO and Chief Lunch Lady of Boston-based start-up Smart Lunches . Emily has built several effective boards over her distinguished career, so I paid close attention.
I found Emily’s response to be straightforward, broadly applicable and as easy to remember. “There are three things that you need to consider when building an effective board”, she said.
- First, Wisdom – Does this person have the right set of experiences to address the myriad of opportunities and challenges the organization faces? Having someone from the same industry may be helpful, but having someone from another similar industry that went through similar growth experiences might be even more helpful.
- Second, Wealth –Does this person have a wealth of valuable resources, network and relationships that will be key to helping you achieve your organizational goals? For example, someone connected to companies with which you would like to partner (or sell to even) and can open doors for you would be valuable.
- Third, Work –Does this person have the time, energy, effort and inclination to help get the tactical work done to achieve your organization’s goals? Board members advise and are not operational, but they do need to have the bandwidth and inclination to make that key phone call you need on a timely basis and or provide some basic evidence to their point of view. After all, you are usually paying for their time and wisdom, not just an opinion. My experience suggests that payment for a board member comes in two forms. One, a per diem for their travel and attendance at board meetings. Two, stock options representing 1-2 percent of ownership on a fully diluted basis.
Ultimately, my experience is that the tricky part of leveraging these nuggets of wisdom comes when you try and strike the balance between all three. More specifically, while it’s great to have a lot of wisdom and wealth around the table, if you don’t have any workers, little will actually get done.
WHAT DID YOU SAY? YOU DON’T HAVE A BOARD. Keep Reading…
To take one step backward, if you are a small business owner and don’t have a board of directors or advisors, I’d recommend you get one. Yes, it’s more work for you and your plate is already overflowing but ultimately, my experience suggests that in the longer run you’ll achieve your goals quicker. Here is why.
The board functions as an objective third party that is going to hold you accountable and ask you the tough questions about your business and its trajectory. As they say, “It’s lonely at the top,” and it does not need to be that way.
As a small to medium sized business owner you are going to be faced with a myriad of opportunities and challenges, which represent cross roads in the evolution of your business. The board, if it’s the right one, will not only be a key strategic sounding board to help you vet everything thoroughly but also will bring their wisdom, wealth, and work to help you realize your goals.
I recently introduced a successful SaaS entrepreneur as a potential board member to an on-premise enterprise software owner, facing the decision of whether or not to migrate their technology and business model from on-site to the cloud. In this example, the business owner now had access to an executive with the relevant network, experience and time to help him navigate the complex set of considerations related to what in anyone’s estimation is a “game changing” technology and business model decision.
The bottom line is that if you want to grow and mature your business, the right combination of wisdom, wealth, and work around your board table on a monthly, quarterly or annual basis is likely to increase your chances of getting there. Speaking of maturing your business, check out our thought piece on that very topic.
Good luck and let me know if these three simple words resonate with you and your board experiences.