Compass Points: Corporate Boards

Corporate Boards

By Roger M. Kenny and Ram Charan, Boardroom Consultants
Authors of E-Boards Strategies: How to Survive and Win

Companies that succeed understand their customers, research their competition, assess risks and develop and execute action plans. But how can small to mid-sized businesses have the broad range of skills necessary to compete in today’s changing environment?

Even the best CEO’s can benefit from counsel and the really smart ones seek out help from their boards. The best CEO’s can have a weak team or an inadequate strategy, so they really do need a sounding board. Director’s can check a CEO’s judgement early on and provide a collective wisdom that can be incredibly helpful.

Many firms broaden their skill base with an outside board of directors or an advisory board.

How does one develop a board?

All too often, people look first at the most powerful, influential, well-connected people they know at the expense of finding the particular skills they need to help the company grow. Before you think about whom would make a great director for your company, think first about which skills you need most, not only today but also in the future.

The best boards represent a variety of skills. Board members need not be from the industry if they have the business know-how that the company lacks. In fact, the different perspective they bring can be a real bonus. Often, when management becomes stalled, outside directors are the path breakers who help the company’s leaders see new possibilities.

The ideal director

Look for people with:

Comprehensive operating back-ground. The best directors have been there, done that. They have strong management experience running a company.
Specialized skills. An effective board member understands in depth at least one specific area that is especially important to the new firm, such as research and development, marketing, or some other function that is part of the strategy, either now, or in the future.
A superb network. Opening doors is one of the most valuable contributions directors make to new companies. Choose board members with great connections - but only if they are willing to share them.
Willingness to coach, not control. Executives who have spent their entire careers in an old fashioned "command and control" environment may be very effective CEO’s, but they generally make poor directors.

Take a good look at the potential director’s company. Does it mirror the collegial environment you want on your own board?

Due diligence is a must. Never hire a new board member without taking the time to thoroughly check out his or her references, reputation in the industry, and "fit" with other board members. Intensive interviewing and background checking is just as important for directors as it is for key executives or financial partners.

Before new board members sign on make sure each candidate knows what board service involves and what the commitment will be. The candidate should understand that you will count on serious devotion of time and energy, willingness to work between meetings and ability to open doors. The candidate’s decision needs to be emotional as well as rational and he or she can’t fake it.

It is important for the CEO to seek out the advice of the board on a regular basis. Your board’s advice could prevent a costly market mistake. Boards are not in the position to create strategy, however, they can give advice on the direction that the senior management team creates for the corporation. When board members come from different backgrounds, they can share a wealth of information and serve as a reality check - providing outsiders’ objective views on the strategy’s effectiveness.

Excellent boards make good CEO’s even better. A superior board shines not as a critic of a CEO, but rather as a continuing advisor and coach. A good board works as a team, adding value and becoming a source of pride internally and externally.

Boardroom Consultants counsels chief executive officers and board committees on corporate governance issues such as board structure, director selection, the evaluation of directors and boards, CEO search, and succession planning.

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