For the CEO of a high-growth company, the question is simple: as you shoot for the moon, whom do you want with you in the command module?
Ideally, you want a knowledgeable, diverse team, including a committed and talented board of directors who can bring operational experience and a variety of viewpoints to guide your journey.
A veteran, active and diverse board is a critical factor in the successful expansion of a company. Board members can be an invaluable reservoir of expertise and experiences. A board can help provide discipline as well as advice to management and help enliven a fledgling company’s brand: well-respected directors add brand and reputational value.
The right board helps management make the right decisions, which translate into better results regardless of the company’s stage of growth. Consequently, high-growth companies should consider assembling a board of directors sooner rather than later, an investment that will pay dividends all along the company’s journey.
Building the right board
There are three key questions to ask when considering the composition of your board:
- What experiences and expertise do I need?
- What do I need the board to do?
- Whom should I pursue?
In each case, one question should be in the back of your mind: Where do you want the company to be five years from now?
In the emerging stage, directors should bring the experience the CEO (and others on the founding team) might lack. Their skills should also complement the CEO’s.
The ideal directors have a strong sense of how lonely it can be at the top — and the experience to weigh in when necessary. And they know how to get along while speaking their minds. It also doesn’t hurt if they have visibility in the industry; after all, potential investors will be watching.
In the rapid-growth stage, the investors you attract will typically take a seat on the board as part of the financing arrangement. Remember that your new directors might have less operating experience than you do, and look for that kind of experience when filling out the board.
At the next stage — next-generation market leader — boards focus on process improvement, risk management and best practices in corporate governance as the company focuses on working effectively across global networks, balancing entrepreneurial spirit with corporate culture and optimizing its capital structure.
Getting the board composition right
Think of building the board as a core responsibility. At first, the founder/CEO is often responsible for making sure the board has the right talent, but as the board evolves, it should assume this function.
As it builds a roster of potential candidates, it should look for directors with informal as well as formal skills. And the board should always take into account the considerable business value of diversity in backgrounds and experiences while remembering that a consistent business philosophy and strategy are vital.
Knowing when to say goodbye
Just as your company will evolve and mature over time, so should its board. Accordingly, a board seat shouldn’t be viewed as a permanent position; gradual turnover is both desirable and healthy, especially in fast-moving industries.
Some companies opt for term limits for their directors, with the terms staggered to ensure continuity; others hold annual elections. Regardless of your board’s policy on term limits, an ongoing and dynamic process of self-assessment should be standard operating procedure.
The board in action
Communication is the key to a smoothly functioning board. Set expectations at the start about duties and roles as well as the time commitment required, and work to develop one-on-one relationships with each director.
From the beginning, board interaction should be open and honest. A continuous dialogue between management and the board is best — and can be handled through email updates if needed. If the lines of communication are always open and the directors do their homework, there should be few surprises at board meetings.
It’s all systems go
A well-constructed board takes time and effort, but it can greatly increase a high-growth company’s chances of success — by giving credibility to an emerging enterprise, providing needed expertise as the organization expands and offering perspective and guidance to a new market leader