A NEW PARADIGM FOR SUCCESSFUL BOARDS OF DIRECTORS

Article by Herb Rubenstein
CEO, Herb Rubenstein Consulting

Introduction

New companies think the last thing they need is a strong board of directors. And they think that they could not recruit a good board or pay for it. New companies are wrong on all three counts.

First, new companies desperately need a strong and active board of directors, even if the founder is not confident enough to show this strong board just how tenuous the company is at the outset. This board is critical for raising money, providing sage strategy advice for the new company and for helping to define markets and find companies.

Second, our experience in assisting in the creation and support for boards of new and existing organizations shows that people of great experience, dedication and talent are willing to sit on a boards of directors, even for start ups and relatively new organizations. Third, the people who join boards of directors, except for highly capitalized companies, generally expect no compensation for the first year, except expenses. Therefore, a company can budget as little as $5,000 for the first year operations of their board of directors and can reap the benefit of tens of thousands of dollars of advice from this new board. In addition, the new board can be instrumental in helping build the organizational capacity of the new business far beyond what could be accomplished without a strong board of directors. The ROI of such a board of directors can be very high indeed. They take time, but they are worth it.

Calculating the Value of A Board

Just based on a simple ROI projection, a board of directors could be the best investment a new company can make. New companies or non-profit organizations that do not have a strong, active board of directors right from the beginning is clearly missing a golden opportunity to jump start their company or non-profit organization.

So now the question is, how does a founder pick such a board of directors? The answer is easy and is explained at length in my book, Breakthrough, Inc.: High Growth Strategies for Entrepreneurial Organizations (Prentice Hall/Financial Times, 1999). Below I present a straightforward set of recommendations to follow in starting your board quest and keeping it running smoothly during the initial stages of your organization.

Selecting the Right Board for Your Organization

A board must be selected based on a careful analysis of what the for-profit company or nonprofit organization requires in human capital (capabilities, expertise, personality, attitude, experience, etc.) in order to achieve its long term mission. The role of the Board of Directors must be defined in writing. Without a doubt, the fundamental role of the Board of Directors is to make the enterprise ethically and financially sound.

Creating A Structure for the Board

The structure for the Board is equally simple. First, bring together key management, customers, stakeholders, employees and others interested in the success of the business or nonprofit organization and make a list of "target areas" where your company or organization could benefit from real expertise and advice. Several areas might include:

• Public Relations, Communications, Publications, Branding and Reputation Building
• Financial Review and Oversight
• Administration and Management
• Marketing and Sales
• Technology, Research and Product/Service Development
• Strategic Alliances
• Intellectual Property
• Customer Relationship Management
• Legal Needs
• Raising Capital
• Personnel Recruitment (Board and Staff)
• Ethics

These dozen "target areas" plus the target areas your research identifies will let you know who to look for to be on your board. In each area you might want to create a directorship for that specific area. Then go out, find and recruit the best in those fields you can reach. If they say no, put them on your list to come back to when you get bigger and keep looking until you have assembled a great team.

Then hold an “informational” meeting and invite potential board members to find out the role, scope, duties and activities you expect of such a Board. After the meeting follow up with each potential board member to see if they are a good fit for your board and if you decide yes, invite them to be on the board and execute all legal documents necessary to have them become an official board member. A month later then hold an actual board meeting for those who have accepted your invitation to be on the board. Then hold board meetings either monthly or quarterly thereafter with conference call meetings held in between face to face meetings.

The Morning After the First Board Meeting

On the day after each board meeting rather than just writing “minutes,” write a list of everything that you, the founder, and each member of the board and each member of the organization has promised to do as a result of the board meeting. See which ones can be accomplished before the next board meeting. Circulate this memo to everyone and manage the Board and the staff from this document. It is imperative to hold everyone accountable for doing what they said they were going to do and producing what they said they were going to produce at every board meeting.

Conclusion

Creating a strong board need not be a daunting task. People like to serve and contribute at the birth of organizations. And new organizations need a strong board to realize their long run potential.

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