Some small business owners assume company boards are for big business, but every organisation should consider the merits of having a board.
If small business owners have built a successful business, why do they need to bring a board in?
A board of external directors can provide valuable support for any business with a broad range of stakeholders, significant bank debt or other financiers, or a growing number of employees who depend on its continuing success.
You don't have to start with a full governance board. You can begin with a group of mentors.
This is where an organisation such as The Executive Connection, an international network of chief executives and business owners who meet regularly to share their experiences, can play an unofficial role.
What are the main functions of a board of directors?
The board needs to strike a balance between setting direction and vision (looking forward) while monitoring performance and overseeing legal compliance (watching the dashboard and rear view mirror).
One way for a board to segment its work is with the acronym, FICKS, which covers: Future Focus - making sure the company has the right chief executive, and overseeing the development and execution of strategy (30 per cent of board time); Issues and Risk - understanding the environment, spotting trends, and identifying risks and opportunities (30 per cent); Compliance - it's important to operate within the law, regulations and best practices but not at the expense of looking ahead (15 per cent); KPI Monitoring - a regular glance at the "dashboard", but don't go over the same questions about the sales figures and budgets month after month (15 per cent); Succession and Skills - ensuring the right people are at the board table and in top management (10 per cent).
How important is risk management to a director on a board?
A director should ask five simple questions: What are the main risks our business faces or what could put us out of business? What are the biggest risks and how likely are they to occur?
Should we accept these risks and live with them; reduce the impact by installing back-up systems; or transfer the risk to someone else? What can we learn from our own or other people's mistakes? How have our risks changed from last year?
How do I get the most out of my board?
It's very important for board members to read their briefing notes, and to have considered a few questions before going into a board meeting.
Consistently reviewing the following questions is essential: Have we got enough information to make good decisions? Do we have too much information, meaning important issues are lost? Was there enough time to read the board papers? How well are we doing compared with our competitors?
Have we done what we agreed to do after our last meeting?
Richard Westlake is director of Westlake Consulting, which specialises in organisational governance.
We want to solve your business problems. From tax headaches to recruitment nightmares - every week, with the help of specialists, we will answer your questions on any topic related to business. Send your questions to Gill at: Southgill1@gmail.comBy Richard Westlake