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How to Build the Best Board of Directors for your Corporation or Non-Profit Organization

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The Board of Directors is the nucleus of the company. The Board is responsible for directing, managing, protecting shareholder assets, and striving to give shareholders their biggest return on investment.[1] Therefore, it is essential a company selects the most effective individuals to ensure success. So, how do you do this? Here are a few tips to ensure your Board of Directors is the best possible.

1.)  Trust and common mission

First and foremost, the shareholders of a small or large company should elect to the Board only members who they trust. Any company in today’s world intends to build value, protect relationships inside and outside the company, and continue to grow.[2] Trust is essential because the Board needs to receive sound information in order to make well informed business decisions on behalf of the company. A lack of trust between the Board, the shareholders, and CEO can destroy success faster than anything else. You will know you have a selected a well-equipped Board, when difficult information is able to be distributed openly, and you trust the Board to decide in the best interests of the company.[3] Having the Board share in your common mission is also necessary to ensure success. The Board should share in your mindset of where you want the company to go and there should never be any doubt by the Board of what is expected from them. A common mission ensures the Board stays on track by maintaining a purpose and not becoming compliant.

2.)  Diversity

A Board made up of individuals from similar backgrounds who all think the same is an open invitation for the company to become stagnant. A company should avoid “rubber stampers” who just simply vote “yes” on every decision.  A company should instead take advantage of diversity and select board members with different voices, members with different perspectives, and those who are not afraid to go against the grain with their opinions.[4] By offering multiple perspectives, offering challenging ideas, and not being afraid to ask the hard questions, a diverse board can ensure the company does not remain motionless, but instead continues to grow with the evolving world around it.[5]

3.)  Experience and Enthusiasm

You should not select someone to be a part of your Board simply because that person is a close family member or friend.[6] Instead, you should select a Board member who has experience making tough business decisions. [7] The Board is often called upon to make the “tough decision” and so it is imperative that you select someone with whom you are comfortable putting in that position. You should also select some board members who have experience in the field in which your company operates. This gives your company an advantage because the board member will know others in the industry and can give the company key insight into what it takes to achieve success in that field. [8] You should also select some board members who have experience in raising capital for a startup company and who may have contacts with eager investors. [9] You also want to select Board members who share in your commitment and are passionate about the company’s success. [10] Board members are expected to attend board meetings and devote much of their time to making well informed business decisions. Therefore, to get the most out of your board, it is essential you select persons who are passionate, well versed, and are going to strive for success.

4.)  Good Chemistry

While you want individual board members that are experienced with high integrity, you should also select board members who will work well together. A Board of directors is like a sports team, good chemistry is required to achieve success.[11] You want to select Board members who you know will thrive in a collaborative environment and who aren’t afraid of being a team player. Your Board should have effective decision-making discussions always with the end goal in mind. A group of individuals who work well together is essential because more time can be spent striving for success as opposed to internal board quarrels.

5.)  Keep it small and at an odd number

For small companies, the Board should be relatively small with 5 being the number of directors suggested by many professionals. A smaller board allows for better quality participation by allowing everyone an equal opportunity to voice their opinions and concerns.[12] If you have an even number of Board members, it is highly likely many crucial business decisions will end up in a tie. [13] However, by instituting a Board with an odd number of individuals, an opinion or suggestion will always win out. [14] A tie amongst Board members can lead to argument, and confusion that will take away from the success of your business.

6.)  Set Clear Goals and Expand your network

“Our goals can only be reached through a vehicle of a plan, in which we must fervently believe, and upon which we must vigorously act. There is no other route to success.” —Pablo Picasso.

As this quote suggests, setting clear goals and expectations is the only way to reach success. Without goals in mind at every meeting, Board members can drift off and become inattentive. Therefore, it is imperative you select individuals who are doers, go getters, and want to continue to build growth and accomplish goals. It is also important you select Board members with an extensive network. Small and especially startup companies can greatly benefit from tapping into the networks of experienced Board members. This will give the company a significant advantage over other companies in the field.

[1] https://www.investopedia.com/ask/answers/05/shareholderinterest.asp

[2] https://www.thefbcg.com/resource/selecting-board-members-guidelines-for-an-effective-nominating-process/

[3] https://hbr.org/2002/09/what-makes-great-boards-great

[4] https://hbr.org/2019/03/when-and-why-diversity-improves-your-boards-performance

[5] https://www.boardeffect.com/blog/importance-diversity-boards/

[6] https://www.morebusiness.com/how-to-choose-a-board-of-directors/

[7] Id.

[8] https://www.thebalancesmb.com/how-to-select-your-corporation-s-board-of-directors-398864

[9] Id.

[10] Id.

[11] Id.

[12] https://www.forbes.com/sites/theyec/2014/07/16/five-rules-for-selecting-your-personal-board-of-directors/#3653668685fb

[13] https://www.forbes.com/sites/theyec/2014/07/16/five-rules-for-selecting-your-personal-board-of-directors/#10836219685f

[14] Id.