The Board Room as an Asset, Part 2
In Part 2 below we explain how to identify and create an effective board to help your business achieve its goals.
Part 2: Creating a better board for your business
A Foundation for Long-Term Success
Many businesses can muscle through challenges. This is especially true for young businesses still in the start-up phase and family-owned and operated businesses. Family owners and founders usually have an abundance of passion and expertise to do what needs to be done. Through sheer grit they can do it all. But at some point, the business will hit a stage where it needs more than that one layer of muscle. It will need people that can view the business as a strategic director and evaluator to create and capitalize on opportunities. The business will need directors that will help shareholders and managers build a strong foundation for organizational passion, organizational expertise, and organizational strength.
Building the right board for your business
The right board brings diversity of background and independence of thought to your business. There is a balance between being like-minded enough to work nicely together and yet being independent enough to not succumb to group think.
Identifying board members with different backgrounds will expand your ability to see the field. Let’s assume for a moment you run a logistics company and you are trying to decide whether to build or buy a new operating system. That decision is a weighty decision, and very difficult to make on your own, especially if you do not have a clear strategic vision for your business.
Imagine though if you could call upon your board of directors, made up of a retired senior leader from a motor carrier, a key customer’s recently retired leader, a financial advisor, an attorney or risk manager, you and your spouse. With such a team you would have the view of your most important vendors (the carriers that haul your shipments), and your customers (they pay the bills remember). They can give you insights into your competition, and your strengths and weaknesses in the marketplace to help you find the right position for your business. Together a board like that can develop a clear path for success. Then you can evaluate the operating system decision based on what which solution best supports that path.
New Board Requirements
That diversity of professional background can raise your board’s value tremendously, but you can go to an even higher performance level with diversity of personal background as well. Some states and localities are going so far as to legally mandate diversity of personal background. California for example, has passed a law requiring any publicly traded businesses based in California to maintain at least 1 woman on its board of directors (the minimum increases in 2021 depending on the size of the company). A nearly identical requirement to maintain at least 1 person of color on the board has also been enacted in California this year. Similar demographic requirements are being considered in cities and states around the country.
Whether required by law or not, diversity in the board room is good business. Businesses can benefit from demographic diversity in the board room because businesses have diverse employees, customers, and vendors. Having board members that can relate to such personal diversity and promote true inclusion in the organization will bring more diverse thought into the strategic discussions for your business and make you a better leader for your employees and a better provider for your customers.
Regardless of professional and personal backgrounds, find the directors that will fit your culture and style yes, but more importantly, challenge your thinking in a positive way. Family and friends that attend a meeting for free are nice, but may not be pushing you as far as you and your business can go. Find directors with the experience and expertise to help you see the whole field. Find directors that will ask insightful questions, be focused on your business’ purpose, and be willing and able to mentor and guide your leadership team. Invest in those directors that support you and your business and will make you and your business better.
In part 3 of our series we will cover how to get the most out of the high-quality board you have created.