Board Member Selection
I was asked to write about Board Member Selection by a reader facing some challenges with the lack of expertise required to make sound financial decisions for their board. My experience in sitting on several cultural boards, business advisory boards, and a healthcare board has allowed me to understand some of the challenges this board is currently encountering.
According to Wikipedia, a Board of Directors is a group of people who jointly supervise the activities of an organization, which can be either a for-profit business, nonprofit organization, or a government agency. Often, we think of a Board of Directors as an oversight group for not for profits. But, as Wikipedia points out, it may also apply to your for-profit small business.
Small Businesses may wish to consider an Advisory Board for their business. This is usually comprised of experts in areas that may assist the small business owner in growing their business and raising their community profile. The Business Owner would need to take the time and reach out to those experienced and well-known individuals they believe could advance their company. This takes resources and a keen sense to know what traits would benefit the firm. However, it can be a very fruitful exercise. For most Advisory Boards, the owner should be prepared to pay each member a nominal value for their time and expertise to assist them. These are normally not 100% Volunteer Boards like you will find at many Not for Profit Agencies which are unpaid positions.
The expertise that is selected for an Advisory Board may not be all that different from a traditional Board of Directors or Board of Managers or Board of Trustees. Do not underestimate the importance of members having a keen understanding of finance, financial statements, and financial analysis. Commercial Bankers are often found on most Boards, sometimes from multiple banks. Their training in finance can usually be a very helpful expertise in moving your business forward, especially if you require bank financing to do so. Understanding how a bank perceives your industry and what type of financial and sales performance it expects, is critical for growth and financing capital expenditures.
Selection of Board Members should be for the best of the business or organization. At times, sports celebrities or well-known accomplished family members can be found advocating for their causes or supporting a small business they have taken a personal interest in or are very familiar with the owner. These types of Board Members can help to raise the organization’s profile as well as garner clients with their name recognition alone. Balancing this type of Board Member with a CPA, a Banker, an Investment Professional who has the financial expertise to set your firm in the forward direction it needs can be a very viable strategy to moving your business to the next level.
Once you have selected a good mix of financial experts and community influencers, be sure to include Subject Matter Experts on your particular business service or product. Often you can find attorneys or bankers with that expertise. Do not be afraid to ask potential board members what their experience in your industry is.
Additionally, if you are interested in providing Board Governance Training, seek out experts in this training. The United Way has an excellent Board Training Course that banks often use for their young professionals. It is a great venue for preparing tomorrows Board Members.
Remember, a Board’s advice is only as good as the experience of the members you have selected. Provide them with a Company Orientation upon appointment and make wise choices as to selection and ensure you have financial expertise, market understanding, community representation, subject matter experts, and forward thinkers. A wise selection will only help your business exceed and excel.
