7 Reasons Why Growing Companies Need a Board of Directors
In my last article we looked at whether your company should have a Board of Directors. Although there
is no prescription for the right time to put one in place, as many start-ups wouldnt be here if they didnt
have a board on day one, concurrently, there is no Expiration Date on a well-run company that does
not have a board by, for example, $10mm in revenue.
However, here are 7 reasons I have found to be true of a growing companys and CEOs need for a
1. You are not as smart as you think you are - Brains and Talent.
Yes, I said it! The old adage is true: Together we are greater than we are alone. Although most
entrepreneurs possess a stalwart optimism and stick-to-it-iveness, the collective wisdom of a well vetted
board will trump your individual opinion, experience and talent every time. Good boards think
offensively when you are stuck and defensively when you need someone to watch your flank.
2. Experience costs too much to learn on the job - Table Stakes.
As businesses progress, sadly, too many CEOs push forward and often learn as they go. After all, its
worked so far. Realistically, the skills to get from $0.00 in revenue (Start-up) to $10million often take
one set of skills, $10mm-$30mm another, and $30mm-$100mm yet another. I do not particularly
subscribe to experience is the best teacher but experience is certainly the most costly teacher.
Improve your odds of success by getting a few board members, as my kids say, who have BTDT (Been
There Done That) and have the brass rings and scars to prove it.
3. Often, in the shadow of your greatest strengths lie your greatest weakness - Self Awareness
As CEOs, we often bring a unique discipline, mindset, gifting or bias as to how to run a company. Many
of us have been forced to become generalists; however, when you roll out a bed and your feet hit the
floor for the first time every morning, you wake up a certain type of person, a CEO, or leader. As such,
and as my Colleague and Mentor, Darin Leonard, so aptly states in this business axiom, Often in the
shadow of your greatest strengths lie your greatest weaknesses. Simply put, if you wake up a Sales
guy, you better find an Ops guy; if a Marketer find a Finance guy; if a Visionary have a Pragmatist; if a
Technician have some Strategists to sit on your board. You get the picture!
4. Forest, Trees, Bark - Perspective
Another associate, friend, and mentor, Dave Parker, has a blog for Tech Start-ups entitled
ForestTreesBark.com, which recently moved to his website http://www.DKParker.com/blog. CEOs
depending on the evolution of the business they are running will find themselves navigating between
each of these preverbal views. Although many would prefer to be missional or visionary leaders (Forest),
sometimes we can only see the trees (operational and tactical complexities), or we get mired in the bark
(urgent, firefighting, crash or bark eating avoidance).
I would like to add roots to Daves insights when it comes to board service. A good board will not only
keep the company leadership oriented at whatever level of view is needed, i.e. strategic, but will often
call for periodic assessments of the overall health of the company - from the roots on up. In short, can
the roots support the CEOs plans? (Roots = Management Team, Banking and Financing Structures,
Capacity, Cap-ex, Merger and Acquisitions Strategy, Market Alliances, etc.) Perspective is hard to
achieve when in the middle of the day to day - boards help here.
5. Serve your company and yourself, the CEO - Proper Mix to Serve
Personally, I am fond of a non-profit language of board service which pretty much says it all.
Ultimately, the CEO and the board need to possess a servant mentality to serve the best interests of the
company, its stakeholders and shareholders. To that end, the needs of the company should be
considered first, then the desires of the CEO.
Just as product mix is important to your sustained profits, so, too, is board make up and mix. Are you in
hot water with your bank or growing at a 30% clip? You better have a banker or finance guy on your
Revenue flat? You better have a sales guru on your board. Need new products to compete? You better
have a new product development specialist.
Bleeding money out the plant door or product returns killing you? Get an operations and quality guru on
your board. You see, board members are there to serve the company, not hang out with the CEO or
provide a stamp for managements decision making.
As my granddaddy was fond of saying, Advice is typically for the benefit of the giver, which I believe to
this day was his kind way of saying what the old adage most of us know as advice is cheapwithout
service. By having a board serve the company, it will automatically serve the interests of stakeholders
and shareholders because without a thriving company, there are no stakeholders or shareholders.
6. Change it up - Be relevant and nimble
I have seen a few companies have the same board members for 30 yearsand legitimately ask why they
are having the same old problems or bemoan that 1980s management decision making is no longer
moving the needle for their company.
The world has changed. If your main customers or buyers are now Gen X or Gen Yers or Millennials,
you better have 1 - 2 crazy-silly-smart-tapped-in ones ;-) on your board for their insights alone.
If your competition can get on Elance.com or ODesk.com and hire 10 people for $3.00 an hour to do the
work you are paying 1 person $30.00 an hour for domestically, and yet you dont believe global
competition has reached your door, you better get a board member that has global competitiveness
knowledge and reach.
The world is changing rapidly and your board needs to keep up to date or they are no longer serving
7. Board member vs. trusted advisor - Ner the two shall meet
Objectivity is a funny thing. We all claim to have it and be able to maintain it, but be it accountant,
attorney, financial planner, wealth manager, banker or consultant, as long as a portion of what you are
paying your trusted advisors for is to serve you or serve a role in your ongoing operations vs. give you
truly objective advice (for a board fee or not), they have lost a degree of objectivity. Your CPA may be a
long-time trusted advisor, so keep paying him or her to give you advice they are responsible for, i.e. tax
and cash flow modeling, etc. However, they cannot simultaneously serve you through fees and offer you
100% objective board level advice.
To be clear, I am not drawing a distinction between the legitimacy and honor of profession, trusted
advisor or board member, but merely clarifying that the company is not best served by having one
person wearing both hats - the conflict is imminent. Remember Arthur Andersen simultaneously
auditing Enron and coaching them how to set up off-balance sheet shell companies not a good plan!
Bottom Line is - The buck stops with you as CEO, so make sure your board has your back and ensure
your company, and those depending on you, will be around for a good long time by carefully vetting a
board and committing to regular meetings.
Next post - Are you working FOR, IN or ON your business and how to step up to the next level.