Your board is a powerful tool. Make sure you are fully leveraging it.
A well-designed board of directors is a powerful tool for a private business. The board can help develop and oversee the business’s long-term strategy, select and groom senior management, and provide a “sounding board” for the business on important or difficult issues that may arise during the year.
Below are eight ways to build a better board of directors at your company, based on our experience advising private business owners across the country.
Appoint the Right Mix of Board Members
To make your board as effective as possible, consider appointing board members who are members of the company’s senior management team, board members who represent the family’s interests and values, and independent board members who do not have a link to the family or management. Independent board members may work in the same or related industries as the company; however, there is also value in appointing individuals who work in unrelated industries to provide the board with a unique perspective on the business.
Provide a Clear Understanding of the Board of Directors' Roles and Responsibilities
Give your board members and senior management a clear understanding of the company’s qualifications to become a board member and the roles and responsibilities of the board. Providing this clarity will help avoid conflict or confusion about the board’s responsibilities and why certain individuals were appointed to the board while others were not.
Fine-tune Board Meeting Agendas
Spend time organizing the board meeting agenda to make meetings as productive and efficient as possible. Prioritize items for which you are seeking board approval (vs. “information only” items). Make sure that information presented to the board strikes the right balance between being informative but not unnecessarily detailed and voluminous. Give your board and management team guidelines for what items and issues are relevant to bring before the board, and what is better addressed by management.
Use Your Chairman to Get the Most Out of Board Meetings
Do not underestimate the importance of the role of chairman. In addition to organizing the meeting agenda, the chairman of the board plays a critical role in managing board member personalities, steering conflict towards consensus, making sure the board devotes sufficient time to each agenda item and ensuring that every board member’s concerns and contributions are heard.
When possible, consider delegating follow-up items and tasks to individual board members or committees based on their experience and willingness to do the work. Committees – comprised of a subset of the board with relevant knowledge and skills (e.g., a compensation committee or audit committee) – are often a particularly effective way to delegate, as they offer specialized expertise and can meet separately. Whether delegating to committees or individuals, authorize them to reach out to third parties and members of the management team, as appropriate, and report back to the board with their findings.
Provide Management with Exposure to the Board
Provide certain members of your management team with the opportunity to periodically present to the board on initiatives or areas of the business that they oversee. This will allow your team members to understand what is important to the board and to see how the board operates and makes decisions. It will also help you and the board identify and groom junior team members for future leadership roles.
Socialize Before Board Meetings
Consider getting the board together over lunch, dinner or drinks the day before the board meeting. Meeting in a casual setting outside of the formalities of the board room gives board members a chance to get to know one another better and will often provide an opportunity to socialize issues and diffuse potential conflicts among board members.
Leverage Board Connections
Board members bring experience to the boardroom but they often bring an impressive rolodex as well. Consider tapping into your board members’ network when needed, for example, to find a consultant for an issue the company is dealing with or seek candidates to fill a senior management position.
Building an effective board of directors with the right people, skills and engagement can significantly improve your company’s performance over the long term. Based on our experience, the above recommendations will go a long way toward this effort. For further recommendations or help implementing them, consider reaching out to one of our advisors who can help you institute the best practices we have learned from working with hundreds of private businesses across the country.
Strengthen Your Board
Our advisors can provide recommendations for your board.
The Northern Trust Institute