A well balanced board of directors is a fundamental function of well-established businesses, responsible for ensuring the company is well-governed and adheres to its overall strategy, regularly assessing risk, staying on budget and being legally compliant. But many smaller businesses don’t have one, writes Cate Poulson, head of talent network at BGF.
When is the right time to start considering a board for your business, and what does a good board look like?
BGF is the UK and Ireland’s most active investor, and we have also built a network of more than 5,000 board directors, which our portfolio companies can access. As head of this network, I’m often asked about the value that a board can bring to a business, particularly a smaller one.
There are understandable concerns. For some, the idea of a board might feel too formal or at odds with the values of the company itself. Others might be concerned by the power they believe a board might wield over the business.
For companies looking to grow, regardless of size or strategy, there is significant value to be added from having a board. And all of these scenarios can be avoided by getting the right people around the table at the right time, having good relationships, being clear on what you want, and giving them the autonomy to work in the interests of you and your company.
Why do you need a board?
The overall purpose of a board is to support the management team in guiding the business forward, offering support and representing the interests of investors and other stakeholders. It can be a sounding board for new ideas and for bringing fresh perspectives. It can also help to expand your network and give you access to other organisations, whether for external advice or funding.
Crucially, the board is in a unique position – it looks at the company from a different viewpoint, which is particularly useful when it comes to things like corporate governance. For high-growth businesses, it can take on responsibility for the strategic direction of the company, shouldering some of the burden that many small business CEOs struggle with when they’re trying to balance day-to-day operations and business strategy.
What does a good board look like?
A good board is all about finding the right people that can bring something new to the table. Each business will have specific needs and finding the right people that work for your business is worth taking the time over, as they’re likely to be a big part of your journey to growth.
A good cultural fit is as important as bringing in people with extensive knowledge. While they don’t have to join you in wearing jeans and trainers to the office, board members that understand the culture and vision that you’ve set for the business and appreciate what you’re trying to achieve will add much more value than those who are just experts on paper.
You should also consider board members who have been there before. Most of the people we have in our Talent Network are those who have first-hand experience in business transformation and scale up. They know what it takes to grow a business effectively and sustainably and can support CEOs and management teams in executing the business strategy and keeping the company on track. By including members with extensive experience in growing and running successful businesses you are making sure the strategic direction of your business is future-focused – if you can find that talent in the relevant sector or market, even better.
How do you sustain an effective board?
Once you’ve chosen the right people to support you in driving your business forward, the next step is finding ways to work together. Everyone has a role to trust and communicate with each other to foster and sustain healthy and effective relationships. Top of the list is being united behind a clear vision, which will help to focus debate and discussion and have tangible measures to hold yourselves accountable. In this way, discussions will result in creative thinking and problem-solving, where everyone feels able to contribute their opinions and be listened to and respected with no one individual or opinion dominating unchallenged.
As the CEO, while having the right people in place can add significant benefits to your bottom line, it’s a two-way street, as they need to be given the information and autonomy to do their jobs effectively. To therefore run effective decision-making with your board, you need to: think about and communicate the decisions that are important to you and which you’d like the board to own; bring the board in early on any big business decisions and use them as a sounding board to consider different options; and agree on a set of principles that you and the board will use to make decisions. By doing this you will manage everyone’s expectations, hold each other accountable, and make sure all decisions are being made fairly and with the company at front of mind.
I’ve seen time and time again the impact that an effective board can have on the growing businesses we work with. In today’s business world, with corporate governance, sustainability, diversity, and recruitment talent, all serious and prevalent challenges, there is a lot to handle for those looking to scale up. A board with the right people in place, will play a significant role in supporting the founder CEO and management team on their growth journey, and help you really reach your potential.
Three steps to an effective board:
1. Consider your existing skillset, and recruit to fill the gaps – while a genuine passion for what you’re doing is key, bringing in those with similar skills or those without a growth mindset won’t help you in the long run
2. Use your networks and take recommendations from contacts that you know to find individuals who have experience
3. Create trusting relationships with your board and give them the autonomy to genuinely support you and your business to grow.