The anatomy of the ideal board of directors
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The board of directors of an investee may only meet once a month, but they have the responsibility of driving the business from the top. Being a director or chairperson may seem like a figurehead role, but it’s actually a very influential role, especially in smaller businesses. The same way that private equity firms say that a great manager can make any business, well, a great board should be able to do the same (they should be hiring the best managers as well as driving the business in the right direction).
The following points describe the anatomy of the ideal board:
- Make sure the board consists of people who will attend board meetings. Don’t select people who are on 20 other boards or who are overseas often; for the mid-market, the board needs people that will actively add value through their actions, not just their name.
- Involve senior management for segments of the meeting so the meeting is more directed and informed. But also make sure there’s a period when senior management are not present so the board can talk frankly.
- Have a reasonably balanced mix of private equity firm reps, founders, executives and independents. Make sure there’s at least one independent with deep industry experience. The number of private equity firm reps shouldn’t out-number the remainder of board members.
- Keep the total number of board members to a reasonable number; 5-7 is the maximum number needed for the mid-market. Too many people will create a bureaucratic mess and will dilute the output of proceedings.
- Ensure a customised agenda is prepared for each board meeting so discussion is targeted and everyone knows the intended outcomes of the meeting. Start each meeting with an outline of the agenda and be sure to stay on topic, at least until the end.
- Send all supporting documentation earlier; at least three days to a week before the meeting so everyone has time to prepare. You don’t want people seeing information for the first time at the meeting unless it’s hot off the press and relevant to discussions.
- Keep channels of communication open so board members can continue to provide guidance aside from the meetings. Too many boards leave issues until meetings and wonder why issues are getting out of control.
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