10 Tips for Forming a Board of Directors
Entrepreneurs who want to take their business to the next level may eventually come to the conclusion that they need a board of directors. But what does it take to form an effective one?
Julie Garland McLellan, a leading governance consultant and the author of the new book Dilemmas, Dilemmas II, is happy to show entrepreneurs how to do just that. The boardroom authority has lots of experience, having spent a lifetime resolving conflict in the boardroom and examining different modes of raising capital.
Here are Garland McLellan's top 10 tips for recruiting and retaining a board:
1. Use a crystal ball: Think long term and recruit directors who can govern the company you aspire to grow into rather than the small business you might be now.
2. Find a go-to guy or gal: Have at least one director who understands boards and governance (preferably one who is trained or chartered by the National Association of Corporate Directors). Don't rely solely on the lawyers and accountants to have governance skills.
Related: Growing Your Business in Management
3. Create job descriptions: Establish a clear job definition for directors (executive and non-executive) and define the role the board will play in strategy, risk management, etc.
4. No playing favorites: Insist that all directors recognize their duty to the company as a whole (or all of the shareholders) rather than play a limited role of safeguarding the interests of one shareholder — even if it's your biggest investor.
5. Include a variety of flavors: Build a team that possesses a range of skills and diverse backgrounds in order to get different perspectives on each strategic discussion. [revised]
6. "Yes Men' (or Women) need not apply: Select directors who would quit the board if they disagreed with a course of action you were taking.
7. Lean toward like-mindedness: Seek consensus on all decisions, not majority voting, and be sure that all directors know how to assess issues from the perspective of the stakeholders and what is right for the company.
8. Draw that imaginary line: Be clear about the differing roles of the chairman and CEO — and don't try to combine them in one person.
9. Remuneration requires research: Pay a fair and responsible equivalent, and seek expert advice if you need it.
10. Boardroom hierarchy: Remember that the CEO reports to the board; be ready for a challenge and embrace the collective wisdom and enhanced discipline.
What advice do yo have for for creating a board of directors? Add to this list in the comments below.
Entrepreneur Editors' Picks
How an Encounter With the 'Armpit of Destiny' Helped the Founder of Grubhub Take His Business From His Apartment to a $2 Billion IPO
You Can Train Your Brain to React to Stressful Situations Better. Here's the 3-Step Process.
A Disastrous Valentine's Day Inspired This Founder to Launch Her Own Floral Brand. It Became a Celebrity Magnet With Retail Revenue Up 450% Since 2019.
What Is Your Dream Job? Ask Yourself These 4 Questions to Find Out.
This Is the Crazy Process This Juice Franchise Went Through to Get USDA-Certified Organic. But It Sure Has Paid Off.
No One Would Rent Me a Café in Trendy NYC Neighborhoods, So I Tried Something Risky. Now I Have 3 Coffee Shops.