Wisdom of the Crowd
Thinking of Building a Board of Directors or Advisors? Learn from Others Who've Done It
Doing it, and want to share? Please email your answers to email@example.com , and provide your name, title, company, location , or if you'd like to be anonymous
For general information only. It is not intended as legal or accounting advice. Accordingly, readers should not act upon information on this site without seeking professional advice.
THE WISDOM AND EXPERIENCE OF BUSINESS OWNERS USING OUTSIDE BOARDS OF ADVISORS OR DIRECTORS:
(if you're too busy to answer all the questions, please reply to your few favorites, but often people with boards are eager to talk about them and share, so feel free to answer all 17)
- What was your biggest motivator for creating an outside board?
- GET NON FAMILY INPUT -FROM PEOPLE WITH FORMAL BUSINESS CREDENTIALS (EK)
- A trusted family business advisor I worked with encouraged me to consider a board. I felt I needed help. Folks I could count on who would offer sage advice that could keep me and my management team accountable and act as a sounding board. I also needed a plan to allow my wife a "working plan" that would offer some comfort of trusted advisers who she could count on in the event I were not here. Thus, as the NEW majority shareholder, avoiding a panic or unnecessary stress of MANAGING the business. (MR)
- What problems did you expect a board would solve?
- HELP US GROW THE BUSINESS SO AS TO BE MORE PROFITABLE (EK)
- I am not sure the Board was expected to solve problems or make decisions but rather advise and challenge me on ideas and the direction that would cause me and others to think or re-think positions and consider different aspects of issues needing to be addressed… (MR)
- How did you determine the size and make up of the board?
(Did you start with categories of expertise you’re seeking, or particular people? Do you seek people who will be collaborative, provocative, confronting? Do you look more for name recognition or worker bees? How much do board members need to know about your particular industry, versus being a creative and strategic thinker, and maybe being purposefully an outsider?)
- ADDED 3 NON-FAMILY MEMBERS TO THE FAMILY-DOMINATED BOARD, SO THEY COULD ADVISE BUT NOT OUT-VOTE. LOOKED FOR PEOPLE WITH GOOD, GENERAL BUSINESS EXPERIENCE TO STUDY OUR COMPANY AND ITS OPERATIONS TO FORCE US TO UNDERSTAND AND ADAPT TO STANDARD BUSINESS OPERATIONS. OUR BUSINESS OCCUPIES A TINY NICHE IN THE HIGH-END, FASHION MARKET. WE NEEDED INPUT FROM MORE STOLID THINKERS. (EK)
- With the help of my business advisor I interviewed and considered many candidates for the board. My family/business advisor was a critical ingredient in assembling the board with the appropriate dynamics. In the second year I did replace one of the members and still feel there is a need for more assistance in certain business area's not being addressed… (MR)
- How did you go about interviewing prospective board members?
(Do family members not on the board get any say, get to blackball, etc?)
- I WAS/AM CEO AND SO HAND-PICKED NEW BOARD MEMBERS. FAMILY COULD ADVISE ME, BUT I WAS IN CHARGE OF THIS ENTIRE PROCESS, AS I KNEW WE NEEDED TO OUTGROW 'ART CAMP' THINKING TO SURVIVE AND GROW. (EK)
- Interviews were conducted one on one and with the help of my family/business advisor who coached me through this process… (MR)
- What was your thinking about inclusion of family members, be they owners or managers or not, on your board? (are owners who are not on the board allowed to sit in on meetings, even if they can't participate?)
- ALL FOUR OF US ARE ON THE BOARD; TWO OF US (THE PARENTS) OWN ALL THE STOCK. (EK)
- I do not believe employees or family members should be on the board. I have access to them whenever needed. I do invite as a guest my wife so she is familiar with the process and would be more comfortable in the event she would step in place as the majority shareholder… (MR)
- How often does the board meet per year?
- TWICE (EK)
- quarterly, except when special needs arise… I do communicate regularly (biweekly) on phone… (MR)
- Do you compensate board members, and if so, how much? Why do board members want to be on your board, aside from compensation?
- EXPENSES + $200/DAY. I THINK THEY ARE INTERESTED IN THE OPERATIONS OF AN ARTSY, NON-TRADITIONAL BUSINESS. (EK)
- Yes, $2000 quarterly stipend. I firmly believe there is a genuine concern to assist me in progressing in developing our Company… (MR)
- How did you determine terms of service, and what policies do you have for renewing or ending a board member’s term?
- DID A LOT OF READING AND SPOKE WITH MY ACCOUNTANT, BANKER, AND ATTORNEY. HAVE SERVED MYSELF ON NUMEROUS NON-PROFIT BOARDS. ON THE INTERNET GOT A BASIC SET OF BYLAWS AND MERGED THEM WITH OUR EXISTING BYLAWS, WITH THE APPROVAL OF MY ATTORNEY. (EK)
- Board members serve at the request of the Chairman of the Board.There is no set plan for specific years of service although IF the interest or need is to change or obtain different influence it would be in the best interest of the company for the member to be changed… (MR)
- What goes into your creation on the agenda?
- REVIEW OF COMPANY ISSUES, NEEDS, SUCCESSES WITH CLOSE ATTENTION TO FINANCES AND INTELLECTUAL PROPERTY (EK)
- Mostly strategic planning issues that challenge and are of concern.Generally clearly communicating the current position including "open book" management position. If presented a clearly understood matter the board would be best able to provide appropriate sage advice. In my case there is a need to be prompting additional information in order to function… (MR)
- How did you structure your first meeting, and how did you educate them on your business?
- DID A POOR JOB. GAVE NEW BOARD MEMBERS OUR CATALOG AND SUPPORTING PUBLICATIONS + A FACTORY TOUR. THEIR FIRST MEETING WAS MOSTLY IN A Q &A FORMAT. INCOMING MEMBERS GOT A MORE FORMAL, STRUCTURED INTRO. (EK)
- Introductions, share backgrounds, why are we here, strategic direction, expected performance, the board is my conscience, get our dash board gauges working. .What I want of the board, develop and plan my own personal needs and needs of the company. Understand some of our greatest challenges. Counsel on important objectives for the future. . Educate the board by being open and honest. Allowing them to "get it"… (MR)
- Who facilitates the meeting, and how much is the President or CEO in control of the proceedings?
- CEO SETS THE TIME AND AGENDA; MEETING IS FACILITATED BY OUR DIRECTOR OF COMMUNICATIONS FROM NYC OFFICE. (EK)
- The chairman of the Board is in control of the board… (MR)
- What was the effect on the board that yours is a family business?
- HELPED US OVERCOME A PERIOD OF MAJOR CRISIS DURING ILLNESS OF FOUNDER AND TAKEOVER BY ME, FORMERLY 'JUST THE WIFE AND AND OFFICE WORKER.' (EK)
- Very important, but it is a responsibility the board members undertake to regularly visit and encourage to base decisions on business facts not the family conditions. (this is very challenging)… (MR)
- What evaluations does the board participate in, including evaluating family members, the CEO and president, and itself?
How much authority does the board have? (ranging from purely advisory determining compensation to firing executives and family members)
- PURELY ADVISORY, BUT WE HAVE PAID GREAT ATTENTION. I CREDIT ONE OF THE FIRST BOARD MEMBERS WITH FORCING US TO BECOME PROFITABLE, NOT MERELY ENJOYABLE FOR THE FAMILY. (EK)
- At this time the board is focused on the senior management. The board has no authority, but is a significant influence on me. The board does not evaluate itself… (MR)
- What positive, even if difficult, changes have been made as a result of your board?
- HIRED A CPA TO RUN OUR FINANCE DEPT; SHE PROFESSIONALIZED THAT OPERATION IN THE COURSE OF A HORRIFIC 14 MONTHS. WE NOW RUN OUR BUSINESS BY GAAP STANDARDS. (EK)
- Many, and mostly significant and too private to share with others. Generally, their influence would include a new perspective, another point of view or some checks and balance… (MR)
- Having established a board, what do you wish you had done differently?
- I WISH I HAD GIVEN THE BOARD MORE POWER AND DIRECT INPUT. (EK)
- Not sure, but I will think about this one more. Maybe I have not given it enough thought till now… (MR)
- Do you have any regrets about even starting down this road?
- NOT ONE (EK)
- No!! I find this very critical and supportive… (MR)
- What other great contribution of a hint, warning, best practice, innovation can you share?
- LEARN STANDARD BUSINESS POLICIES AND PROCEDURES, AND USE THEM. STUPID TO RE-INVENT THE WHEEL, AS YOU WILL DO IT POORLY. (EK)
- If you are feeling alone and thinking you want to improve yourself and your business get a board of experienced, trusted advisers who will provide you guidance to accomplish you goals. A board will provide a mechanism for greater accountability… (MR)
THANKS TO THOSE WHO CONTRIBUTED ANSWERS:
EK= Eleanor McKay, CEO, Niermann Weeks Co., Millersville, MD
MR= MIlton Rosenberg, CEO, Bernie's Appliances/Televisions/Bedding, CT & MA
answers from non-business owners (educators, advisors, etc)
Mike Trueblood, Director, Cal State Fullerton Family Business Center
Here's my take based on what some of our members have done. Motivation: in one case, get a Board and assign them the responsibility of succession planning, because the owner/CEO found no other way to deal with the issue, and it worked; in another cases, the 2nd generation president knew he had to convince his siblings and the Mom and Dad that for the company to grow, it needed outside expertise beyond what the current management had the capacity for, so he set about using a top consultant to set up an Advisory Board, which consisted of someone really sharp in Marketing, and another outside advisor, good on governance issues..they only had to pay about $50,000 in Advisory Bd. fees and got themselves on an aggressive growth curve without having to hire full time people; and one last case, the company was able to keep the business family-controlled while raising enough capital to buy out the rebellious 3rd generation of the family.
ANOTHER GREAT ARTICLE ON BOARDS AT http://www.umass.edu/fambiz/kawasaki_art_of.htm