A board of directors can guide strategic direction, governance and ensure long-term success.
However, many small business owners don’t realize that these boards can be as helpful for a private company as they are for a large corporation. Â Here’s what you need to know about assembling your private company board of directors.
What does a board do in a private company?
A private company board of directors directs a company on a fiscal or strategic level. Â The board comprises experts in the company’s industry, business, and leadership fields.
Some business leaders might balk at ceding any control to a board of third parties, but plenty of benefits can outweigh the risks.
A board of directors will bring various skills to the table that you won’t be able to master on your own. Â They provide a valuable outside perspective that can help you clarify your business. Â A private company board of directors also puts clients and employees at ease by providing a layer of guidance and support that your business wouldn’t otherwise have. Â The board’s primary responsibility is governance and not day-to-day decision-making.
The board has voting power or say in the company’s decision-making process, although whether their input is binding depends on the type of arrangement your company has. Â An advisory board, for example, is less formal, while a fiduciary board comprises shareholders who usually appoint their representatives and have veto power.
Private Company Board of Directors Best Practices
If you’re assembling a board of directors for your company, here are some crucial steps to consider.
- Be clear about your needs. Â Before you start building your small business board of directors, it’s essential to determine the purpose and goals of the board. Â What specific challenges or opportunities is your company facing? Â Are you looking for board members who can provide financial expertise, industry knowledge, strategic guidance, or all of the above?
- Recruit a diverse group. Â Once you have a clear understanding of the purpose and goals of your board, you can start identifying potential board members who can help you achieve those goals. Â Include individuals with diverse backgrounds and perspectives with skills you know you lack. Â Avoid creating an echo chamber. Â A board of “group thinkers” is ultimately detrimental.
- Establish clear roles and expectations. Â It’s essential to create clear responsibilities that each member will agree to when they accept your invitation to join the board. Â This includes defining the specific duties of the board as a whole, as well as the roles of individual members.
Once your board has been established, please don’t leave it on autopilot. Â Instead, regularly evaluate the contributions of your board members to ensure that your company is benefitting. Â Periodic reviews, such as quarterly or annual reviews, will allow you to change direction.
Ultimately, the right board of directors can be invaluable for your company. Â By assembling valuable members with a clear vision, you can hear new perspectives and learn from other highly qualified leaders in your field.
I offer small business coaching services that can help you learn more about making the most of your board of directors for small businesses. Â Click here to schedule a free video call, and let’s chat about how to assemble your own effective private company board of directors.
Coach Dave
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