Get the most out of your board
The key to maximizing board value? Ask the right questions.
Whether you recently created a board for your family business or you have had one for generations, you always want to maximize the value you get from this governance structure.
The rewards of having a board can be immeasurable, but clearly there is a cost as well. Compensation of the outside directors is one part, but more important is the time and attention required to organize and run these meetings. Some simple work will help you maximize the payback from this investment.
Start outside board members off on the right foot with a rigorous and organized onboarding process. Before their first meeting, have them visit your headquarters or facility for half a day. Make sure they have a solid understanding of the business, how it works and its history. Most importantly, have them meet with several long-term employees and start to get a feel for the culture. Corporate culture, especially in a family firm, is key competitive advantage. The better your advisers understand the company and your family, the better their advice will be.
Many leaders will allow the boardroom to be overwhelmed with minor details and tactics. Your executive team is there to run the business day to day. Small decisions should be left at the appropriate level. The board creates value by helping you focus on strategy and direction. Never lose sight of that.
Pre-reading packets should be sent to the group a week before any meetings. This allows the board members to get up to speed and eliminates a waste of everyone’s time on less valuable reporting. These written packets should include key metrics as well as any background information needed for robust discussions on upcoming key agenda items.
Setting your board calendar well ahead of time is important. High-caliber advisers lead busy lives. Rescheduling or holding meetings with members missing is counterproductive and frustrating for all participants. I recommend having a rolling one-year schedule laid out so the dates can be reserved.
Many family businesses struggle to understand what the board meeting should be about. After a few years together, it is not uncommon for a board to feel as though it has tackled all the obvious or important strategic questions.
My best board agendas come from paying attention to executive sessions.
· What topics keep getting brought up over and over again?
· What concepts are we debating without resolution?
Nagging questions with no easy answers are precisely the things you need to take to your board. Present the problem and focus on it. You will be amazed by how independent perspectives can bring new insights.
There is a fine line between facilitating and leading a meeting. To facilitate is to set the table on a topic, present the appropriate background information and provoke an intelligent discussion. When a CEO or senior family member leads a discussion, they are showing their bias on the direction or decision they are looking for. This can influence the room and cripple free thinking and perspectives. Leaders like to lead. Resist the urge.
You can use “executive sessions” to discuss sensitive topics. These sessions typically include only the CEO and outside board members, excluding other internal board members such as the CFO or some family members. This is a better venue to tackle CEO compensation or performance as well as staffing decisions that might affect other employees who participate in board meetings.
Executive sessions should also periodically be used to discuss succession planning, compensation, strategic mergers and acquisitions, and selling the company. The rumor mill thrives on such information, so limiting who has access to it can be wise. These are difficult subjects, but it is your responsibility as the leader to be prepared for anything.
Lastly, make sure you evaluate and change your board members when appropriate. This is often most difficult in a family business, where long-serving board members are like members of the family. Dismissing board members does not mean that person failed, it just means they are not the tool you need to fix the next problem the business faces. Some family businesses implement a specific tenure policy so board turnover is not a matter of opinion. These policies force the company to rotate members and better oxygenate the group dynamic.
These are just a few ideas you can get started with to improve your board’s performance. Look for other ways to improve your execution. Ask peers how they run their boards or ask your board members what has worked well for them in other posts. Embrace an attitude of continuous improvement and adapt the board to your needs as you grow.