A company’s board of directors provides the company with direction and advice. It is their responsibility to ensure that the company fulfills its mission statement. In doing so, the company’s overall policy objectives are frequently set. For these reasons, a good board includes knowledgeable and experienced business people. Your business will immediately gain legitimacy and a panel of expertise you may not otherwise have “in house”. Directors with specialized knowledge such as law, finance and marketing become a valued resource providing guidance and much needed advice in critical centers of the business.
Over the next four quarters RINA will spotlight four different topics related to a company’s board of directors including the top 10 reasons you need a board, how to build an effective board, board best practices and examples of strategies from the best and worst boards.
The Top 10 Reasons You Need a Board
A board will help you set aside your tactical perspective, get outside the organizational boundaries of your day-to-day perspective and force you to work on the business. It will allow you the unique opportunity to look at the business objectively and from every angle. It forces you to work on strategy instead of tactics. It allows time to develop new ways to improve the entire business enterprise. Don’t underestimate the impact formalizing a board can have on a family or small partnership business.
Below is a list of the top ten reasons of what a board should do for you as written by Kraig Kramers, nationally-known speaker and former CEO of Corporate Partners, Inc. which is based in Atlanta. Kraig Kramers passed away in October 2014.
- Make more money — Good boards make huge differences in the company’s bottom-line and value.
- Bring me stuff — Often the board can get cash (lenders, equity, and more) as well as identify new strategies, or duck an approaching comet.
- Help me not screw up — Another really good reason for a board is to keep from screwing up. It’s too hard to anticipate everything, let your board be your eyes, your ears and your pulse-checker. It will save you money and grief.
- Get me out of this mess — Yes, getting out of trouble is what good Boards are for. Boards bail you out strategically, bringing multiple experiences to bear on the really tough nuts. Boards offer an ongoing, big picture, financial/strategic view.
- Blame it on the board — Some CEO’s and owners aren’t confrontational or can’t tell the bad news - a great reason for a board is to blame unpopular stuff on them.
- Window dressing — If you’re going public, getting a loan, merging, or just trying to look good, a rock-solid board is window dressing to up your multiple.
- Coaching — board members can be great coaches for you and for your people: use them.
- Corporate governance — For public companies, those looking to go public, and certain private companies, boards are mandated.
- But they’re expensive — Actually not, but only if you are using them right. Boards should create more wealth for your company and more time for you. It’s called managing smart, not hard. Boards are cheaper for your company than attorneys, or even in-house personnel.
- Focus — Actually, the number 1 reason for boards: they get the Company’s people into the present and out of the past, focusing on preparing for the future. Yes, this is strategy, but it’s also an imperative. Boards challenge, create, pro-act, and position you to maximize owner wealth.
To further discuss your Board of Directors and how to make them more effective, please contact your RINA representative.