Big Payoffs from your Board of Directors
By Russ Holdstein
If you are still uncertain as to why you need a board, even for a small start-up, read this personal experience article.
For years the Board of Directors of my company met at the breakfast table. My wife and I were the entire Board. We never held any formal meetings, just signed the papers the lawyers put in front of us once a year. To me, the Board was just a legal necessity – something the government required in exchange for the benefits of being an incorporated business.
Sure, I knew lots of companies that had Boards because investors required them. That just seemed another reason not to have a Board. Who wants a bunch of outsiders telling me how to run my company? The ironic thing was that I was doing just that – paying top dollar for expensive consultants to tell me how I could do my job better!
It was one of those consultants who suggested that my Board could become not only a source of expert advice but also a group of friends working for my benefit. He pointed out that, as majority owner, I would always have the final word and the Board would never be able overrule me. I would be able to select very smart people to join me in what was the most important financial endeavor of my life.
I invited four people to join me on the Board. I became Chairman, my consultant became a key board member (and ended his consulting role), and my COO joined the board along with my wife. In addition, I invited a good friend who was the president of a regional bank to become a member of the Board.
We met every two months and spend most of the day together. The benefits of having an outside Board became immediately obvious:
The Board gave the entire management team a new sense of professionalism. Each of the senior managers was expected to report to the Board at every meeting. Their presentations consisted of a report on results achieved, problems encountered and a projection of anticipated achievements over the next two months.
This process helped depersonalize much of the management process. Instead of me being seen as the demanding CEO who was never satisfied, the Board process made it clear to managers that being held accountable for results was not a personal issue between them and their boss, but was a professional issue that went to the heart of what their job was all about.
As CEO, no one ever gave me an annual review. Now my Board was asking the kind of uncomfortable questions that no one had asked me before. I began to see myself in a different light – more as a hands off manager and less as the person with all the answers. My decision making process became more deliberative, more consultative and more productive.
At times my Board challenged the actions I wanted the company to take. At first I found this very difficult to deal with. I had to remind myself that the people serving on my Board were there to help me. I had asked them to join the Board because of the respect I had for them. So it only made sense to listen carefully when they told me they thought I was wrong. To my surprise, I found that virtually every time we disagreed, I was eventually persuaded that the Board was right and I was wrong.
Although I talked regularly with my Board members, we only assembled as a group every two months. Because many of the Board members were completely removed from the day-to-day work at Payday, they brought a detached viewpoint to the bi-monthly meetings. I was so close to so many issues that I had wrestled with on a daily basis (and sometimes in the middle of the night) that I often lost perspective. The Board helped define and prioritize problems and helped develop new solutions. I almost always left Board meetings feeling that a weight had been lifted from my shoulders.
By recruiting Board members with specific expertise and connections, I was able to add a tremendous amount of wisdom to my management team at a very small cost. Instead of paying consultants by the hour, I was able to call any Board member and get excellent advice.
From time to time the Board was called on to resolve disputes that arose between me and one or another of my managers. The issue usually had to do with the calculation of bonuses. Although I often came away from these mediation sessions not getting what I wanted, the Board was seen as fair by all involved.
Putting a Board of Directors together is one of the more rewarding tasks a business owner has. It doesn’t take a lot of time, isn’t very expensive and has a very high payoff.
© 2008, Russell S. Holdstein. All rights reserved