Finding Directors That Add Value To Growth-Stage Companies
A highly effective board makes a key contribution to the success of the business, and this is particularly true for growth-stage companies. Assembling the right group of board directors can be a challenging task.
Board members can be invaluable resources who provide advice, knowledge, and access to their networks. Unfortunately, not all board members offer this. For example, some directors promote the interests of the investors or founders they represent far above those of the business.
Also, do avoid the five types of dysfunctional board member defined by Jack and Suzy Welch: The Do-Nothing, The White Flag (always avoids confrontation) The Cabalist (focused on personal agenda) The Meddler (constantly preoccupied with details) and The Pontificator.
In early-stage companies, board members should assist the management without becoming involved in operations, through advising on product strategy or providing introductions to new customers, partners, or recruits. They can also act as mentors to the CEO or other members of the management team. More established businesses may need support related to increasing sales, scaling manufacturing and other areas.
Avoid creating a board that is too homogeneous and form a diverse team, compiled of varied profiles.
Board members need to be fully committed. They’ll attend all your board meetings, come to your events, and go to meetings with you and on your behalf. They’ll put in whatever time is necessary.
You need to appoint directors that speak their minds, who are not afraid to raise a difficult topic during a meeting, even if it relates to someone in the room. They should have plenty of ideas: some directors soon run out of steam with their advice. While they may make an impressive start, after a while they have nothing new to add. Board members should be able to draw on extensive experience and offer practical advice to the evolving growth -stage company.
Capable directors are focused on strategy, they are not operationally involved: they must be strategically engaged and understand the fundamental drivers of the business-markets, competition, technology, finance etc.
Ensure your board member is well-connected in that he/she has a large network, and is willing to leverage it. Finding and securing partnerships for growth-stage businesses, especially when you’re trying to form a link with a much larger company, can be helped by utilising board relationships.
The strong candidate understands that the board’s role is to represent all stakeholders. As outside board members join the board, they have a responsibility to consider the needs of investors, employees, customers and other stakeholders.
Ideal candidates for growth-stage companies are C level executives who have been part of a company that has increased from £5M in revenue to £50m or more with growing profits. The ability to share the lessons learned from the growth path is invaluable. These individuals are typically hard to attract, so an effective recruitment process is needed.
In addition to growth experience, candidates should preferably have sector experience. Recruiting directors who are respected in a company’s sector helps the perception of the company as an industry leader.
While there is no specific method of defining a successful board member, they will “fit” with the company culture and with the CEO and other directors. They will also be able to speak credibly on the board and company’s behalf with customer prospects and management talent.
Relationship difficulties can have a detrimental effect on the board. For example, board members who become involved in day-to-day decisions can inhibit the CEO’s ability to lead. Furthermore, overly assertive directors can cause CEOs to commit to unrealistic plans. While CEOs are responsible for their own decisions, they can still be unduly pressurised, especially when the board member is an investor (whom an inexperienced CEO may feel obliged to defer to). Finally, some board members may be professionally and technically capable, but are unwilling to mentor, nor can they successfully get on with other members, or become part of the team.
To find new board members you should tap into the current directors; ask them to suggest candidates, look to existing customer companies, utilise your partner network or choose an executive search firm with experience in this area.
Most entrepreneurs are highly individualistic, and their individualism drives their business. To grow the company successfully, they must also have the expertise, experience, strategic overview, and connections of an effective board of directors.
About the Author
Robert Kilpatrick, Kilpatrick