How to Build a Great Board
“I should be getting more from the Board!”
So shared the CEO of a privately-owned company on a recent advisory call.
“There are going to be changes to the board this year, but I’m struggling to get my footing on an action plan.”
She’s not alone. As both a board member and an advisor on board formation, I’ve seen how often leaders struggle to build a board that actually fulfills the promise of adding value to the business.
Forming a great board starts with answering three key questions.
Why do I have a board at all?
What experience should each board member bring?
How can I find and recruit them?
You need the answer to each question to address the next one. So, let’s go through them in turn.
Why do I have a board at all?
Of course, public companies have no choice – though that hardly relieves them of the need to gain great value from their board. Every company should deliberately consider the value a board should play in guiding the business.
In my book, good boards add value by dramatically improving the leadership team’s access to insights into three primary areas: the organization’s Strategy and Business Model; their Leadership Development and Succession Planning; and their Risk Appetite and Mitigation. This can occur in myriad ways but include introducing new ideas, improving the angle of an existing idea, increasing focus, revealing blind spots, spotting assumptions masquerading as facts, or strengthening decision-making.
One CEO describes his goals for the board like this: “Since we are a management led company, I look to my board for four things:
Know & amplify our culture;
Enhance shareholder Value, long-term;
Test our strategy, as in push, poke, prod, ask curious questions;
Identify “blind-spots,” (in terms of risk, finances, people development, and so on).”
What skills and experience do I want in each board member?
“Teams work best when everyone knows what position they’re playing,” a mentor of mine told me.
Now that you know the role you want from your board, it’s time to define the roles within that team. If you were rebuilding a baseball team, you wouldn’t staff it only with pitchers. You’d select a roster that fills in gaps to create a stronger total team. So, we move to a more granular level of thinking – looking to the qualities needed for each member, both individually and in how they complement your management team and other board members.
“Dream a little bit.” I said to the private company CEO. “Fill in this blank: It will be great for us when I can collaborate with someone who has experience in ___________!”
What experiences do you wish you had access to but that you can’t hire independently? Don’t rush this step. Here’s why: You want this person to dramatically enhance your company over the next several years. And don’t waste this valuable slot recruiting someone you can hire in another way – like by the hour.
This list could be nearly infinite. In this particular situation, the private company CEO’s perfect candidate will have experiences that look like this:
But you’re not quite done: you must consider the kind of person you want to work with. I once considered approaching a person I knew to be deeply connected and brilliant. Upon investigation, someone with working knowledge agreed with my assessment and then told me, “I can’t imagine a more disruptive personality in the board room.” My advice is that you are looking for a personality strong enough to hold independent views and team-oriented enough to want to collaborate and build ideas into something larger.
Put all that together and we can describe the perfect board member as the solution to a three-variable equation, captured in the graphic below.
In the center oval is the highest value work that a board contributes; namely contributions to Strategy, Leadership and Talent, and Risk Appetite and Management (including compliance functions).
In the next oval out from the center are the specific experiences that your company desires. These could be functional (e.g. marketing or finance) or industry-specific (e.g. real estate, building materials distribution, or medical devices).
In the outside oval are the personal characteristics your company wants. The intended goal, presumably, is to form a group that brings both independence of thought and judgment, as well as an ability to work inside a group.
How can I find and recruit them?
Now that you have shaped your goal, how will you find and recruit them? This is a two-parter. First, how will you find the person who has the experience and skills you need? Second, how can you give yourself the best chance of getting them to join your board?
Relative to the first part – “The Search” – there are no shortcuts. I have participated in processes led by search firms or by company representatives. Under any circumstance, it is time consuming and requires thoughtful, patient work. Some considerations:
Do you have the time to do a good search, as well as the energy to be creative and thorough with possible sources?
Will you be able to trust the search firm? Different people have different needs for control and insights they gain moving through this process. Only you can answer that question.
If you have good answers to our first two questions, above, maybe a search firm is ready to run the search for the ideal profile you created.
If not, and you/yours can devote the time, it might be time to get smart on board recruiting venues. There is a whole world of networks out there that can potentially identify interesting candidates, without which you wouldn’t have knowledge.
Relative to the second part – “Attracting” – make yourself look organized, thoughtful, and wise by documenting the basics. Sure, these are in your head, but are they written in a nicely presented piece? And have you really answered all of them? Your basics should cover:
What you are seeking in a board member and why. Be specific.
A succinct description of your company.
Your estimate of the time commitment and associated obligations.
The compensation.
The role of the Board compared to the role of Management.
Governance practices, high level.
Your Directors and Officers insurance coverage.
What will be done to orient and integrate.
Closing
“So, get serious about what I need; define the solution to the three-part equation, organize our package, and decide how to conduct the search,” said the private company CEO. “Anything else?” she asked.
“Yes, one more thing: be as sure as you can about your decision.”
Board members are “sticky.” Once on board, even in high-performance and accountability-driven boards, it will take time to realize a mistake; damage will be experienced by the entire board; and the removal of a low-performing board member takes time. Be as sure as you can be.