Tuesday, March 25, 2014

How to Reinvent Your Board as You Grow

An Interview with PSMJ consultant, Don Thomas

How do we find effective directors?
You need to look for someone who knows the industry, who has served in the role of the director before, someone who has a big-picture view, who understands how to govern a business and who has good external market knowledge and good connections (preferably).

How do you get people interested in becoming a member of the board of directors?
Make sure there’s something in it for the director—not necessarily compensation.  There are the other people you could meet, connections you could make, the subject matter of the company itself. Financial gain depending on what the business of the company is.  Narrow down the “what’s in it for them” angle.

Who are the types of people you never want to seat on your board?
Someone who’s too narrow minded, too set in their ways—internal or external—instead, it should be someone who really looks at the company, looks at the company’s best interest and understands the shareholders’ role and gives them their voice and protects them.

How do you convince internal directors of the need for outside directors?
If they have grown up in the company, and they haven’t had much exposure except what they know in their own company, it’s a great place to get external inputs whether it’s in the business realm or political. I found that access is always an important consideration, and by access, I mean people who know other people who can open doors—doors that might not be able to be opened by the people who have grown up in the company and don’t have those access points.

What’s a good size for a board?
Smaller is better than larger: 5-7 people; I get worried if boards are bigger than that. It’s harder for more people than that to agree on something.  You want people who are engaged and empowered and knowledgeable. Boards should also be looking at a board’s succession—board should be looking early enough to make sure they see how a board works.  It’s important to grab technologically savvy individuals because technology is such a huge part of business, and new leaders need to have a broad perspective on where the company is going with technology.

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