When and how to set up Board of DirectorsShuchita Gupta
Ask a young founder or a start-up runner or an entrepreneur what was challenging for them the most when they set out to fulfil their dream through their venture and they’ll likely tell you about the nightmare of bringing the right team players on board. As they formalize their dream venture, they add co-founders, contract based employees, freelancers who will share their goals and provide their time, talent and treasure. They also tend to seek advice from ex-bosses or business associates or friends or other resources and associates – basically whoever comes handy. This is the story when you start-up.
Then comes a time when you progress in the graph. Your organisation flourishes. Functions such as marketing, finance and operations are created by new and existing team members. Meetings turn into long, time-consuming presentations, clients multiply, priorities get set, decision-making becomes the hardest task and so on. And in the midst of all this your contract based employees want to become part owners in the venture, and freelancers turn into permanent employees.
This is the time a company should go ahead and setup Board of Directors.
Setting up a Board of Directors:
For a new business or a start-up, it’s important to be extra cautious about how you set up a board of directors. You have to pay special attention to a wide spectrum of details about the advising body. The role of a board of directors has evolved over the years. They are more like a council of experienced associates whose knowledge base can help set the tone of your company and make the big-picture decision making. Board of members aren’t there to do the task for you but they are there to provide guidance and leadership and insight at a higher level, so you can have a crack at it.
What Kind of Board do you need?
Start by asking this very important question – what kind of board your business needs? Would you prefer a less formal advisory board, which doesn’t have an official role overseeing finances or making business decisions, but can still help guide the company. Or do you want to set up an official board of directors which will not only improve the workplace environments but also direct your company in the right direction. Or do you need a board of influential people who would not only bring in their experience but also help provide business leads and advance the company’s mission.
What kind of board people to choose?
Choosing the right people to fill your board is the most crucial part of the process — and proves to be most difficult. It gets more difficult than bringing the right team members when you started your company. These are the people who wouldn’t get on the journey with you but show you how to sail through. Now the trick is to make sure you’re bringing on people who complement your existing skill set while adding a combination of new abilities and experience to the table. Get people who understand the business and the industry that you’re in so they can think strategically. You can accomplish this by bringing on retired or former CEOs and other people with managerial experience. For instance, an attorney can easily help you with human-resources issues or a marketing maestro can help fill a knowledge gap on marketing issues.
What strategic activities or goals to set for the Board of Directors?
Boards should have a set of bylaws that can specifically lay out responsibilities and powers. When writing by laws, you should be sure to clearly state their goals and activities – bringing fresh perspective on the decision making, Including compensation or employment decisions as the board’s responsibilities, whether the advice of the board is binding and who’s in charge of the ultimate authority for making decisions about the company. There need not be any loopholes – one has to chalk out everything. The bylaws should also include term limits for board members.
The Role of the Board of Directors
Now, overall, the board of directors bears a legal responsibility to govern an organisation. Fulfilling that responsibility encompasses many individual roles and tasks. And each board member brings different strengths, talents, and abilities to the board. When these strengths and abilities are merged towards the growth of an organization, it creates a synergy that makes it possible for an organization to accomplish the vision they set out for!
Providing direction for the organization
Every board of directors gets its direction from the organization’s vision and mission. The vision is what the organization wants to see happen. The mission is the action plan to accomplish the vision. Since the growth of the organization centres around the mission and vision, the board of directors should take great care in forming mission and vision statements that encompass the organization’s goals.
Select, supervise, support, retain, evaluate and compensate the manager
The board is responsible for selecting Manager candidates and selecting a suitable candidate from the pool of applicants. Once appointed, the board will work collaboratively with him/her to carry out organizational plans. The board of directors is also tasked with reviewing the performance of the Manager on quarterly basis.
Monitoring & Managing Financial Resources to protect the organizations assets & member investment
Board members should have a good idea of how much money is coming in and how much is going out. Board members should monitor funds and spending categories, because they have a collective responsibility for fiscal expenditures to their shareholders.
Govern the organization in its Planning
Ample amount of time is allotted for the Board members to get on with the organizational planning. Right from determining to monitoring the organization’s products, services, and programs, from keeping themselves up to date on competitors to building strategies in developments in the organization’s field – A-Z of organizational planning is taken care by the Board. Board members should also periodically review the strategic plans and review whether goals are being met.
Assessing and Developing Skills for Special Situations
Organizations may require substantial board attention in any department – could be finance, could be governance issue, could be recruitment. So, each board member should continually develop his/her skills by seeking opportunities to further educate himself/herself about the organization. Board members should develop skills in the areas of organizational knowledge, fundraising, cultivating and recruiting board members and volunteers, and understanding financial statements.
It’s better to take into account all that you need to create a board, but it’s best to bring in those who would good devote enough time to fulfil their roles appropriately and advance the work of your organization. Remember good advice and right direction offer the greatest value for any organisation.
If you think it is time for your business to have a board or if you are seeking help with creating a board of directors feel free to reach out. You can write to me or connect through this form.