CANDIDATES
Candidate Toolkit |
THE BOARDSPAN LIBRARY
The Boardspan staff reviews and selects the most informative articles from business news sources, including:





We categorize articles to make them easier for you to find.
- Exec. evaluation & comp
- Critical information about evaluating and compensating the executive team.
Why Every Company Needs a Board of Directors
Companies are prone to making mistakes. Not having a board of directors is one and I'd like to explain why I believe every company should have an active board and how to do it.
Early on in my career, I was fortunate enough to have consulted with hundreds of businesses that ranged from one person operations to 500-person, mid-sized firms. One thing I noticed is that entrepreneurs, founders and CEOs have common characteristics, one of which is that they are, on average, very strong-willed individuals. This makes sense when you think about what kind of person decides to venture out on his or her own. Although a good thing, this strength can also be a weakness because it can morph into a dangerous strand of stubbornness that can negatively impact a business. Even the entrepreneurs who are pleasant and calm on the outside tend to be fairly dogmatic people deep down--and not great listeners. They struggle with the process of obtaining (and then integrating) advice from outside sources. If I had to identify one reason for the failure of entrepreneurs I have known it would be this: stone-headedness.
There's a relatively simple antidote to this problem of inherent entrepreneurial obstinacy--get regular peer reviews from people outside of your company. The big, Fortune 500 companies figured this out a long time ago, and it's called a board of directors. Establishing a board of directors is not inherently going to solve the problems you're hoping to solve. If you fill your board with your golfing buddies or your family, you have not found sources of objective feedback. Look for people whom you trust and know, but who don't necessarily have skin in the game. Look for individuals with strong views, who will challenge you rather than tell you how smart and wonderful you are. There is no point in having an an external board that just goes along for the ride. Here are four guidelines to help you craft an effective board.
1. Invite people who are financially independent from you and your company.
Your board members should not rely on you financially or "need" you in any way. Again, the best board members don’t have any skin in the game. They must be truly independent to be effective.
2. Look for people who aren't afraid to voice their opinions.
The board is not a place for "yes" men and women. I'd look for people who are actually slightly confrontational but who understand the need for teamwork.
3. Find people who agree on the path the company is headed.
Not heeding this guideline can have serious consequences. Remember, you're inviting this person to have a voice in the strategic direction of the company. Regardless of the formal structures you put in place, a single voice on the board can be incredibly powerful (either for good or for bad). If you have one (or several) voices who are singing to a different tune than your own, and by that I mean they fundamentally disagree with you about the direction of the company, you could be headed for problems. You want outspoken board members, who will be candid with you. You do not want board members who don't buy into your vision. If you're shooting for Pluto, you don't want to travel with someone who thinks you should be going to Detroit instead.
4. Add people that know things you don't.
I've made this mistake personally. About ten years ago, the board of my company Sageworks was loaded with finance people. I began to notice that our board meetings were dominated by finance and accounting topics, which is a great way to get to sleep, but not necessarily a great way to build a company. Not to mention that the executive leadership at the company also had this kind of expertise. We weren't getting the diversity of knowledge and experience from our board that we needed to have a fully formed, effective body.
Even if you follow none of these guidelines, simply establishing a board is a move in the right direction. It's an acknowledgement that you may not be the smartest person on the planet, which can be a difficult notion for many entrepreneurs to come to grips with.
Brian Hamilton is cofounder and Chairman of SageWorks.
This article originally appeared in Inc. and is republished here with the author's permission.
MORE ARTICLES
Refreshing Your Board of Directors
Patrick R. Dailey, Ph.D. and Joel M. KoblentzMore Female Board Directors Add Up to Improved Sustainability Performance
U.C. Berkeley, Haas School StaffBoard Governance Depends On Where You Sit
William GeorgeBattle For the Boardroom
Ludo Van der Heyden and Chris HowellsNight of the Living Board
Matt PalmquistThe "Third Team" Approach to Board Effectiveness
Denis Mowbray and Coral Ingley (both from Auckland University of Technology)Tapping The Strategic Potential of Boards
Chinta Bhagat, Martin Hirt, and Conor KehoeLean Strategy Not Just For Start-Ups
Carmen NobelInvolving the Board in Strategic Planning
Jean-Daniel BrissonBest Practices: Non Profit Governance
McDermott Will & EmeryValue-Focused Corporate Governance
Christian Orglmeister, Marcos Aguiar, and Daniel AzevedoTen Key Dimensions of Effective CEO Succession
Thomas J. SaporitoThe Trouble With Too Much Board Oversight
Olubunmi Faleye, Rani Hoitash and Udi HoitashPurpose, Vision, Mission, Values
Graham KennyRunning More Effective Board Meetings
Mark SusterA More Effective Board of Directors
Ana DutraCulture & Business Performance: What’s the relationship?
Method Frameworks StaffCorporate Culture, Not Lip Service, Counts
Luigi Guiso, Paola Sapienza and Luigi ZingalesBuilding a Forward-looking Board
Christian Casal and Christian CasparWhen Best Practice Isn't Enough
Simon C. Y. WongCollaborate Better
Leigh ThompsonThree Critical Talent Conversations For Every Board of Directors
Jean Martin and Michael GriffinOutgoing CEOs Shouldn't Pick Their Replacements
David F. Larcker, Stephen A. Miles, and Brian TayanFive Things Every CEO Must Do in the Next Era of Globalization
Hans-Paul Bürkner, Arindam Bhattacharya, and Jorge BecerraD&O Liability Insurance: An Overview
Priya Cherian HuskinsBest Practices in Compliance
Stefanie MoscaWhy Every Company Needs a Board of Directors
Brian HamiltonWhy Leadership Isn't Just For Leaders
Sally Helgesen10 Principles of Leading Change Management
DeAnne Aguire and Micah AlpernThe Double-Edged Sword of CEO Activism
David F. Larcker, Stephen A. Miles, Brian Tayan, and Kim Wright-ViolichThe Buck Stops and Starts at the Top
Cathy L. Reese, John Michael Farrell & Jose SierraBeware Financial Mishaps at Nonprofits
Kate Barr4 Ideas for Improving Effectiveness & Reducing Risk
Stuart M. AltmanPlanning Ahead – The Board’s Role in Crisis Management
M. Hill Jeffries, Kyle G. Healy, Marshall M. ChalmersThe Economic Case for Soaring CEO Pay
Anup SrivastavaSurviving the Sophomore Slump: Moves That Matter The Most
Roselinde Torres, Judy Johnson, James M. Citrin, and Susan S. HartLeapfrog Succession: Trend in Appointing CEOs
Roselinde Torres, Gerry Hansell, Kaye Foster, and David BaronWhy Clawback Provisions Are a Must: Present and Future Risks in Financial Services
Brian Jebb and Sarah HenchozCan Cutting CEO Pay Help a Faltering Company Rebound?
Emily AyshfordWhy Senior Leaders Are On The Front Line Against Cyberattacks
Tucker Bailey, James Kaplan, and Chris RezekCorporate Data Privacy: Time To Grow Up
Dan CurrellCorporate Governance in the Age of Cyber Risks
In collaboration with RANE (Risk Assistance Network and Exchange)The Board’s Role in Managing Cybersecurity Risks
Ray A. Rothrock, James Kaplan, and Friso Van Der OordHiring For Cultural Fit At The Top
Eric J. McNultyAudit: Radical Change on the Horizon?
Stephen DavisHow Boards Can Create Inclusive Cultures for Organizations
Mike Fucci and Terri CooperDear Board Member: Your job just became even more important
Abby Adlerman and Mary CranstonThe Risks and Realities of Overboarding
Michael ToebeYour library is currently empty. Browse the Boardspan Library to get started.