For some entrepreneurs, the lockdown has provided a breath of fresh air. The opportunity to read that book you purchased a year ago, develop new skills, attend webinars or spend quality time with loved ones. It is also an opportunity to put in place systems that will be beneficial to your business such as establishing a board of governors.
Over 50% of the entrepreneurs I interact with at the Sinapis Entrepreneurship Academy are in the start-up or early expansion stages of their businesses, and a common question we discuss is “Do I really need a board?” Typically, the top priorities are sales targets, finding new customers, setting up systems, troubleshooting and sourcing capital. It is quite easy to shelve the idea of a board to a later stage of the business. Let’s discuss this common question and its implications on the business and the entrepreneur as a leader.
- A board approves major decisions
When it comes to making major decisions as a leader, you’ve probably found you can excel in your areas of expertise or knowledge but often need to make decisions outside of your skill set. This exposes you to the potential of being blindsided by other risks that may affect your company.
Anne (not her real name) came to the Sinapis Academy excited about her groundbreaking idea that would meet the needs of her target audience. She was, however, concerned that her idea would be stolen by the software developers she needed to engage for a new app. During an open discussion period in class, she shared her concerns about securing a patent to protect her idea. Fortunately, one of her classmates had been through the process of securing patents. As the classmate shared her knowledge on various patents, the costs and holding periods, intellectual property laws and the difference between patents and copyrights, Anne gained new insights that changed her approach to the idea and the whole class was enlightened. She realized what she needed was a copyright instead of a patent. New knowledge can be a game-changer.
Similarly, a board supports entrepreneurs in the decision-making process by adding knowledge, expertise, and technical aspects that shed light on strategic choices. By selecting a board with expertise in areas you lack, you benefit from their wisdom and the protection when they weigh in on major decisions.
- A board oversees corporate governance
Governance refers to the set of activities undertaken to ensure all aspects of the business are professionally managed including the legal, financial, and professional obligations. Why is this important? Consider the example of an entrepreneur lacking accounting skills; a balance sheet may just be a bunch of figures; nevertheless, even figures tell a story. Without the right support, this entrepreneur may make the wrong decisions after analyzing the figures. Now imagine if the entrepreneur had a team of brilliant minds discussing the company’s balance sheet. The team would enable the entrepreneur to interpret not only the meaning of those figures, but the implications for the next financial year and, with this information, develop a strategy to chart the way forward. Of course, corporate governance goes beyond finances. Good governance is important because it signals a well-run company that is proactively handling potential risks to the business and prudently stewarding the company’s resources.
- A board is a strategic partner to the CEO
Normally, the CEO reports to the board. This can be disconcerting to alpha go-getters who are accustomed to supervising everyone and reporting to no one. However, from a tactical point of view, a good board works for the advancement of the business and will bring expertise, knowledge, networks, as well as access to the resources required for success. John C. Maxwell says, “Every leader’s potential is determined by the people closest to him.” Bear in mind that a strong board can increase your potential as a leader in your organization. Reporting to the board is also important because it keeps you accountable, and “accountability breeds response-ability.” (Steve Covey)
Recruiting the Board
Did you know that besides the bones of the skull, your brain is protected by a covering of three thin membranes called meninges? The brain is also cushioned and protected by cerebrospinal fluid. That’s because the brain and spinal cord form the central nervous system. This complex system is part of everything we do. It controls the things we choose to do—like walk and talk—and the things our body does automatically—like breathe and digest food. (School of Neurological Surgery, University of Pittsburgh)
Similarly, the board, as the top decision-making team in your business, influences every aspect of the company, and may very well protect the business from potential pitfalls. Please understand that it may take more time than the conventional employee selection procedures, and lots of consideration to nominate and bring on suitable board members. Here are some things to consider when choosing a great board:
- Find people who believe in your dream – just like your visionary customers
- Pursue people who can get you access to relevant resources and contacts that you can’t get on your own
- Seek professionals with skills that you don’t have and can’t afford to pay for initially e.g. accounting, law, branding & PR, or technical skills that are crucial for your business
- Find people who don’t need you. If a board member needs you for financial solvency or any other reason, they may not be independent enough to give you unbiased advice
- Look for team players who aren’t afraid to voice their opinions
Your board structure will be stipulated in your company constitution or incorporation memorandum. It’s a good idea to have a lawyer walk you through the board structure, e.g. where voting for decisions is applicable. As a startup, an average of 5 board members will do, then as your business grows, they may increase to 8 – 12 members.
Most startups kick off with an advisory board. This is an informal consultative group of individuals who have agreed to provide advice to the company on a regular basis. Unlike the board of governors, an advisory board has no decision-making authority and no legal responsibility for the company.
Take advantage of this season to think about, research, and initiate contact with people who may serve on either the advisory board or the board of governors. Remember, if they are to assist in making strategic decisions that affect how the organization runs, then recruitment will probably be a rigorous process that requires your best attention.
Where there is no [wise, intelligent] guidance, the people fall [and go off course like a ship without a helm], But in the abundance of [wise and godly] counselors there is victory.
Proverbs 11:14 (Amplified Bible)
Written by Victor Omollo
Victor is a Sinapis trainer and an entrepreneur himself. In 2015 he launched The Peculiar People, a company that supports professionals to cultivate better decision-making, embrace challenges as opportunities for innovation, and empower entrepreneurs. He is passionate about the Lord, his family and helping leaders and teams proactively articulate and achieve their strategic goals.