Do You Have An Effective Board? (May 2014)

What is the role of your board?  While I realize that many small companies have neither an official or unofficial board, bigger companies have a board of directors. Articles abound about the purpose of a board of directors and I would encourage readers to find a few and understand the legal responsibilities of a board. But meeting the legal requirements doesn’t speak to whether the board is effective and legal requirements are not the subject of this article (I’ll leave that to the lawyers). 

This newsletter is about whether your board is effective.  Some of you may have been involved with multiple boards over the course of your career, but some reading this may be working with their first board or may not even have a board of directors or advisors for their business (I’ll use directors and advisors interchangeably for purposes of this discussion).  

Let me share with you my view of the characteristic of both good and bad boards. 

Good

·   Consist of people with subject matter expertise who bring additional and broad perspective to the company

·   Ask thought provoking questions about the strategy of the business and seek to understand why certain paths are being recommended over others

·   Bring strategic relationships to the table

·   Challenge management thinking in an effort to be helpful

·   Independently verify information about the business and industry

·   Dot the legal i’s and cross the legal t’s but have a broader purpose

 

Bad

·   Bring limited outside perspective and do not fully understand the company operations

·   Either ask no questions at all or turn the board meeting into a detailed operational review

·   Rely solely on management as a source for information about the company

·   Offer little in terms of relationship building to the company and industry

·    Are such good friends with the CEO that they will not challenge him or her and exist merely to ratify decisions

·    Focus on the procedural and meeting the minimum legal requirements of their responsibilities

While I rarely serve as a member of the board for my client companies, I am almost always in attendance at meetings.  Over the years, I have attended countless board meetings and recently attended one of the best.  

A good board can help management guide and transform a company while a bad board can sit idly by and watch a company fail (and in fact, hasten that failure).  I have personally seen both. 


If you do not have a board, I would encourage you to start to build one.  Over the life of your company, it could add tremendous strategic value and could be the key difference between success and failure if times get tough.  If you have an effective board, embrace it and leverage it to the best of your abilities.  Finally, if you have an ineffective board, deliver a wake-up call.  Tell members what you expect and start to replace those who do not deliver.

If your business could benefit from fractional CFO services, I would welcome the chance to speak with you.  Please give me a call at (314) 863-6637 or send an email to   For more information, visit www.homza.com


your cash is flowing.  know where.®    
Ken Homza   
Copyright @ 2014 Homza Consulting, Inc.

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