Having reported to, and been on boards of small and medium size businesses (SMBs) for some time, I can tell you, what people think a board does and what they actually do is often very different.
For the purpose of this post we will be discussing boards for growing businesses, either privately held or micro-cap listed companies as that’s my sweet spot (and I’m writing the post, so what I say goes 😉).
So, lets discuss what value a board actually brings. Now I know this is contentious and there are people far more experienced than I in this world, but in my view, for SMBs the success of a board is down to the following:
70%+ Selecting and managing the CEO and ELT (Executive Leadership Team)
Putting together a great team is far more important than driving strategy. Boards don’t actually drive strategy anyway. They make the final decision sure, but the strategy comes from the CEO and ELT, that is why its so important to hire the right team.
Selecting the right CEO is critical as they can develop the ELT in their image and drive the culture and environment that helps the business succeed. Selecting the right CEO is difficult though. It needs to be the right person, at the right time in their career, preferably who has done something like this before (or promoted from within) and that the board can see themselves working with successfully.
As much as we don’t like to admit it in business, personality matters and if you don’t have the same working patters or ideas (how to provide feedback etc) the relationship between board and CEO can become fractured. There has to be a mutual respect and the board needs to provide oversight but also freedom for the CEO to execute on the agreed plan.
But it’s not just about selecting the right CEO, its about how the board manages them. The sage advice which might make a good idea into a great one or quashing a bad idea which may save the company from making a costly mistake. That’s what boards are great for, they have been there and done that.
Boards, especially for SMBs, should also actively be involved in promoting the company and helping the CEO with potential introductions to capital, partners, clients and key staff.
Depending on who is on the board (a topic for another post), there should be certain Directors who can help with different parts of the business. For SMBs consider someone with M&A experience and with raising capital, Directors that have helped businesses grow far larger than where your business is now and those with finance and governance experience to make sure the numbers stack up and you don’t run into any compliance issues.
That brings me to Governance (I’m falling asleep as I type). While Governance is not the sexiest thing or fun to discuss, it is crucial to the success of a business, especially as it scales. Directors should have either significant experience on boards or you should insist they take a Company Directors course.
So, if you are growing your business and putting together a board then please take it very seriously. This is an important time in your business and setting up