©2000 Stalley Associates Inc. info@stalley.com Alone at the Top The CEO of a small, growing company can feel lonely at times. Singularly responsible for making key decisions at crucial times in the company's life, he finds himself developing markets, solving production problems, finding key employees and investment dollars, and planning for the future-on his own. To make matters worse, employees can be imperfect advisors. While their knowledge of the company and industry is strong, their perspective can be too industry-specific, they may not feel comfortable speaking frankly to their employer, or they may inadvertently or intentionally offer advice influenced by their personal stake in the operation. The Alternative: a Board of Directors Much more useful to the CEO is a board of directors or board of advisors, carefully created to offer the executive a broad range of experience and industry perspective. Growing a business up and out of its infancy is a complex process requiring a variety of competencies. And high levels of management competency are just what potential investors are looking for. A well-designed board of directors can be the perfect addition to a young company's management team. Collectively and individually, it can advise the CEO on critical management decisions, and serve as a control mechanism to question and redirect should the company wander in its mission. Moreover, potential financing sources, investors and even senior job candidates will assess your company by your board. Remember the adage, "You are judged by the company you keep." Defining the Board Decide what you're creating before you start searching for members. Seek legal assistance to determine whether to use a board of directors or a board of advisors. Both provide the important counseling assistance; the choice will be dictated by legal or ownership concerns. Assess your own professional weaknesses and those of your staff. You'll want to bring onto the board those with strengths and expertise in these areas. You will probably have a significant number of helpful contacts within your own industry. Seek members who have different spheres of influence and contacts that you might not have including financial, marketing or governmental. Stipulate that your board should be made up primarily of outsiders, those without any close business ties to the company. The advice of insiders such as employees, the company's banker, its attorney, major suppliers, and primary customers is already available as needed. And the objectivity of such advice cannot be guaranteed; insiders are stakeholders. The Company's attorney could serve as Corporate Secretary and attend board meetings, but not be a voting member. His counsel might become necessary regarding legal issues to be resolved. Draw up a job description for directors, stating formally the duties and responsibilities, the background/experience/personal qualifications required, length of tenure (ten to 12 years maximum), performance review procedures, and the time commitment required. Specify, as well, that they should be available to meet/talk one-on-one with the CEO as time permits. Remind yourself that you are seeking individuals who will speak their mind and stand up to you if need be. "Yes" men on a board of directors offer the CEO no value. Selecting the Members Understand right from the start that this step will be time-consuming but critical to the success of the board. Prepare yourself by knowing what types of expertise you're looking for. Executives from other companies, people from the academic world, consultants, and other business owners are likely candidates. (Don't worry about finding big names; they'll be difficult to obtain.) Often overlooked are second-level managers at large corporations, usually running operations at least the size of small companies. Recently retired executives can also provide valuable insight, and will have time to devote to the job. Compile a candidate list. Ask your business associates and acquaintances for candidate names. Your bankers, accountants, attorneys, and social contacts all travel in different business spheres. Their contacts may become candidates for the board or they may provide you with additional names for your contact list. Once your list is set, create occasions where you can meet these candidates and get to know them better without involving them in heavy-duty business meeting. A golf game would work, or perhaps a lunch meeting where you are joined by the person who suggested the candidate. Using the Board Effectively This is the CEO's responsibility, from start to finish. Tell the directors clearly that you expect performance. Consider developing a formal job description for the directors. Then, define that performance, and give them the information they need to be effective participants. Don't leave it to them to figure out how to be useful. Let them know, for example, that you expect that they come prepared to meetings, but make sure that you send them valuable reading material at least a week prior to the meeting. Create an environment that makes them want to participate and contribute. Listen to what they have to say. View their lack of specific knowledge about your industry or business as a strength; it gives them the freedom to suggest new ideas without worrying about what's been tried before. Candor is important. The directors need to know the bad news along with the good. Keeping them in the dark on the difficult issues you may be facing minimizes their effectiveness. Additionally, they have a fiduciary responsibility to your shareholders. If they don't have all the facts needed to make sound decisions you are placing them in legal jeopardy. Let them know that you need them to be a sounding board for your ideas. Create occasions to meet with directors individually, outside the board meeting. This is often when a CEO gets his or her best advice. Consult with the board on issues critical to the health of the company. They should be directly involved with corporate strategy and policy development, and should provide guidance on the development of the company's strategic, financial and marketing plans. The board should also formulate and approve basic personnel policy guidelines. Periodically hold board meetings at your plant sites or other facilities so that they can become more familiar with your operations. Create ways to let your board members get to know some of your top aides. This gives them a working knowledge of the kind of assistance and backup you have. Perhaps start the practice of having division managers make periodic board presentations. A critical, final suggestion: impress upon your board members their responsibility to exercise authority when problems occur and to hold the company management responsible for its decisions and action. You want board members who will stand up to you when you are wrong. Just knowing that they are watching tends to make you and your staff more accountable and responsive. Company Size is Irrelevant An effective group of directors or advisors is a valuable asset for any business. Small, upstart companies can make excellent use of a board, but are usually too occupied with startup to create one. Consider allocating the time, however. Adding a board of directors or advisors expands the number of tangible and intangible resources available to a company, the kind of resources that small, growing companies need to become leaders in today's competitive business environment. Back to Management Perspectives