What a team of outsiders can provide and the benefits you’ll reap
The CEO of any large public business has a board of directors that assist with the decision making and management of the organization. Too often, those running privately-held or family-owned businesses are insulated from such influential figures. Developing, managing and growing a small business requires reflection, information gathering, short and long-term planning, and a good sounding board. Ideally, a well-formed independent board of directors provides all that and more.
Putting in place an independent board can be one of the best business decisions you can make. Surrounding yourself and your business with successful, experienced business people will give you invaluable outsider perspectives on all facets of running a business.
What an independent board can do for the business
It’s not unusual for busy business owners and managers to suffer from tunnel vision, which can be a result of being so entrenched in the day-to-day operations of the organization and management of personnel.
A solid board of directors can offer input, guidance and networking resources. Imagine the wealth of knowledge you would have access to and the pitfalls you could avoid when working with a board of veteran CEOs with various backgrounds and years of accumulated 20/20 hindsight. As a matter of fact, emotions are a built-in factor of running a family business that can often be a distraction. The board can be helpful in resolving family issues that affect the business.
Who should sit on the board?
The make-up of an independent board of directors is critical. An effective board should include members from outside your industry but familiar with the technical and marketing facets of your specific business and the industry as a whole. It’s best to include representatives from the financial and legal professions who can advise when decisions pertaining to the law and risk management need made. Consideration should also be given to individuals who can provide customer and vendor contacts, offer marketing expertise and help determine strategy for growing and developing the business.
Again, it’s not imperative for a private or family business to have a board of directors. But establishing a well-formed independent board should result in more effective operations and a more profitable business, not to mention a CEO who is able to focus more on taking the company to the next level.
Source: Carl Kampel, “Why Privately Held and Family-Owned Businesses Should Have Independent Boards of Directors,” financialexecutives.org, 29 Sept. 2014.