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Six Lessons When Forming New Boards Of Directors


Specializes in strategy, finance, M&A and governance for private and family businesses. Experienced Corporate Director. Kona Advisors LLC.

As I look back at the many new boards I have been involved in organizing, certain lessons keep repeating. While there are nuanced differences between fiduciary and advisory boards, the basics are the same. In my experience, advisory boards tend to have a narrower scope than fiduciary boards. They mostly pertain to private, not public companies, and they are rarely responsible for regulatory issues.

If you are thinking about forming a new board, keep these lessons in mind:

Establishing a board is a process, not a quick event. Getting to the first meeting easily requires three to six months or more. This time is used to draft a charter; define qualifications, personal characteristics, experience and other factors; build a pool of competitive candidates; and run the interview process. Most processes require multiple rounds of interviews to narrow the pool to only the worthiest candidates. Remember, “fit” is the single most important factor in board member selection and success.

Getting the new board to become a cohesive decision-making body typically requires a year of operation. If they only spend four days a year working together, that is not much time to get to know one another and develop trust. Active committees do help in this regard. I find that the best onboarding process includes 1-to-1 time between all combinations of internal and outside board members, starting as soon as elections are confirmed.

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Understand the constituencies. The board’s mandate and its members need to be focused on the needs of their constituencies. While this is mandated as ownership, the word “stakeholder” is in common use for good reasons. The board needs to understand pre-existing conflicts and how they came to be. Directors need to understand where stakeholders may hinder progress or outright sabotage needed changes. These understandings become the foundation for the judgment and perspective they will need to guide the organization forward.

Deliver a clear mandate. You should form a board to advise the ownership on critical questions. These few questions should anticipate the major issues that are likely to occur during the next three to five years. It is too late for a new board to address today’s problems. Consultants are likely better suited to resolve immediate needs. The individuals driving the board formation process need to devote time for quiet reflection and deep conversations to anticipate the future and the requisite organizational challenges that are likely to occur.

Manage the outsiders. Don’t be afraid to change players in the middle of the game. Sometimes a candidate presents well and interviews well but doesn’t fit in with everyone else. A sophisticated recruiting process will consider how the leading candidates will mesh. Strong candidates will want to know who they are dealing with before they commit to a one- or three-year term of service.

Include the management team. The top tier of management that is not on the board is a critical support function for the board’s deliberations. Best practices suggest having these functional leaders meet and present to the board on a rotating basis. Board members want to hear from the people who do the work. This is an easy means to check on what they are being told by the CEO and/or CFO who funnel and sanitize most of the information they receive. This also helps the outside board members understand the company’s culture. It will make the managers feel better by taking away the mystery of the board room.

Evaluate and inform. Feedback is the breakfast of champions. Board evaluations are a process unto themselves. For instance, will you have group or individual reviews? Will you conduct surveys or interviews? Who, how and when is the feedback delivered? How will one deal with a negative review? Evaluations can help improve board performance but need to be done thoughtfully. Frankly, I believe this only becomes relevant after a few years of operation; at that point, the chairperson can understand the group’s dynamics and, therefore, decide how to navigate this delicate issue.

Boards often make all the difference when it comes to business performance, succession planning and risk management. While each situation is unique, the process to launch a new board is fairly well understood. It makes sense to learn from the past.


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