Call me overly optimistic but I predict the next challenge on the horizon will be figuring out how to manage growth opportunities. The markets will eventually ramp up with fierce activity from pent up demand created during this long recession. There will be opportunity for every small coatings operation—a select few will make the most of it. If you’re not sure how to take the next step, it’s time you considered getting some help from some friendly allies. Small private companies can benefit big time from an “outsider” board of directors, here’s how to make it a win, win.
As a private company you’re pretty much left alone to do your thing. It’s why most of us start our own business in the first place. So, why would a private company want to add outsiders to their board of directors? If you choose them well, there are many instances when it makes a lot of sense.
Here are 9 signs you should consider adding outsider directors (you only need one):
- Your company grows from small to mid-size—requiring more structure.
- The market is changing or is expected to change even more.
- You’re just plain committed to growing—by adding capital, management and infrastructure, or developing and executing on meaningful goals.
- The business is vulnerable to external influences, such as environmental regulation, increasing energy costs, or even foreign competition.
- Internal organizational changes are imminent—such as family issues, generational transfer of management.
- You’re contemplating diversification through acquisitions.
- Company wants to increase shareholder value or shareholder distributions significantly. You’ve decided to sell the company or you are considering an IPO.
- You anticipate major outside debt or equity financing, which requires a lot of advance preparation to obtain competitive terms.
- Special expertise is needed for things such as patents or international affairs.
Unlike numerous other outsiders like ISO, IRS, EPA, banks, insurance companies and OSHA—a board that includes outside directors can be a low cost, low risk, valuable resource AND they will be on your side.
How to do more with your board of directors
I’m in the process of reading a new book called ZILCH, The Power of Zero in Business, by Nancy Lublin. In one chapter about creating valuable boards, she says there is no reason why you cannot realistically envision, “… a point in the near future when someone asks you what your board really adds to your company, and you say, ‘How much time have you got? I don’t even know where to begin.’” Here are some of the points she makes—some are quite compelling:
- Put your target market on the board. Board members don’t have to be old white guys with gray hair. Imagine the insight you could gain from those who can speak from personal experience. With so much focus on the customer these days, why wouldn’t you seat them on your board?
- Don’t compensate your board members. What a concept eh? You want to insure their motivation for joining the board isn’t monetary. You can offer a little prestige, some broader networking, but you want people who can be motivated by the mere challenges the company faces. It helps when they possess some connection to the business, industry or some direct experience with one or more of the challenges you see in the future.
- Meet in the field. You don’t need boardrooms! The struggle with attendance is usually about keeping the meetings fresh and relevant. Boardrooms rarely help. Hold your meetings at the business, perhaps on the shop floor, or maybe at an end user showroom where they can see some of your product in context.
- Don’t put the CEO on the board. Common mistake most companies make. As leader you will certainly attend all the meetings. You will also write the agendas, plan the event and do just about everything else. But you shouldn’t vote. If you were confident that the individuals on the board of directors are serving for the good of the company, why would you need to vote? You make your pitch, they listen and then they vote.
Managing growth will determine your quality of life the next time a recession comes around. Start now to build one of your most powerful assets for zilch, zero. Let me know what you think.