Uncommon Sense: Are Your Directors Directing?
A harsh indictment, perhaps, but there's no doubt that short- and long-term management advice is often conspicuous by its absence today. And it is precisely this advice--advice about marketing programs, product development, business strategies and planning, organizational development, and the critically important cultivation of human resources--that should come from the board of directors.
Clearly, the board of directors can be an asset of significant value to any organization, large or small, public or private. Unfortunately, in many organizations, particularly closely held, family enterprises, the board is a cosmetic structure with little if any utility.
In these cases, the board consists of the minimum number of members with no truly independent representation, meets only the minimum number of times required, fictionalizes minutes, and often discusses and reports on banal and useless topics. Preparation for board meetings is missing because the owners don't want to provide the board members with the necessary information, or the board is not qualified and/or interested in digesting the information if it is provided.
Establishing a board of directors composed of outside, independent, nonfamily, experienced business managers is an excellent way for the entrepreneurial manager to obtain critical, objective counsel and guidance. Fortunately, it can be done. Here are some guidelines for establishing a board of directors that can objectively supplement the CEO's management skills.
A documented description of the board's functions and role is essential. Without this it will be difficult to recruit effective, qualified board members. The CEO and the owner of the business, if the owner is not the CEO, must be committed to continuously educating the board members about the nature of the business.
Qualifications for board members go far beyond formal education or financial success. Qualifications should focus on breadth of experience, knowledge of business practices and problems, contacts in the business world and leadership skills. People whose companies do business with the company should not be considered. They are too likely to have agendas that limit their independence.
The directors should be independent, loyal to the enterprise and, needless to say, willing and able to participate actively. Actions of the board should accrue to the benefit of both majority and minority interests, on an evenhanded basis, and reflect what is in the best interests of the business enterprise. Directors must have the courage to bring "bad news" to the owner-CEO. This responsibility is the one most often shunned by directors.
Good directors will decline the invitation, or withdraw from the board, if they feel they cannot perform the real functions of directors or if they see the owner-CEO wanting only yes-men and pawns. However, following these guidelines will help establish a board of directors who will provide crucial short- and long-term management advice.
Directors who will, in fact, direct.