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A small business blog featuring tips to help entrepreneurs succeed in the small business world. Topics include family business, human resources, marketing, money, networking, operations, ownership, startup, taxes and technology.
Finding the Right Outsider Board Member
If your business is big enough for a board of directors, then I highly recommend you have at least one board member who is an outsider. The benefit is having someone with an unbiased opinion available to give a better perspective on issues at hand. He/she can also help to mediate when the rest of the board, who are probably directly involved in the company, can’t reach a decision.
When interviewing prospects for the outsider position on the board, be sure to address the following:
Find out why he wants to be on your board in the first place. You want someone who recognizes the importance of your business in the community. Another great reason to look for is a desire to mentor up-and-comers in the business world. Even a desire to expand his own network or curriculum vitae is reason enough to motivate him to be a successful board member.
View of the Future
A great candidate for a board member position is someone who has already considered about how your business can improve, before even walking in the door. She has ideas for the growth and development of your business and, whether they are what you have in mind or not, it shows that she will get you considering options and brainstorming and that’s what counts. And, clearly, anyone who already has ideas to hand you has a decent understanding of the business world, which is, of course, a must.
Being on the board of directors for a business, although not the most time consuming (typical board members put in approximately 20-30 hours a year), does require a certain level of commitment and availability. Therefore, you should avoid appointing someone who sits on more than three or four boards a year. Those who do are typically more focused on their own monetary and social gains rather than the development of your business.
Board members are a part of the company and should be held to the same standards as the rest of your staff. So, it’s a good idea to evaluate them once a year to make sure they are providing what your company needs.
In fact, it is recommended that, for businesses just getting started, outsider board members (or all of them for that matter) serve only a one year term initially, to be evaluated on the interim. If they are working out, then consider reappointment for a possible longer term. And, if not, you have no obligation to keep them around.
Be aware that all board members expect to be decently compensated for their time. A typical smaller company (with less than $25 million in revenue), offers equity to its board members at 0.15 — 1.0% plus travel expenses (around $750-$1300 a year).
Additionally, you should probably have Directors & Officers (D&O) Insurance, as many top-notch candidates won’t serve on a board without it. D&O protects board members if your business gets sued and runs from $10,000 to $50,000 a year.
• Inc.com: How to Vet a Board Member
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