A board of directors will help you build leadership skills and take a more strategic and well-rounded view of business. If you’re in growth mode, or you have plans to grow, a good governance team will help your business reach its potential.
Whether you choose an advisory board or a formal board of directors, you’ll benefit from a team of experts with a vested interested in your success.
There are no hard and fast rules on when you should get a board together.
Setting up a board might be a good idea when you:
A business advisor or mentor can help you decide if a board is right for you.
This applies whether you have an advisory board, a board of directors, or a trusted advisor.
Many business owners worry they’ll lose control of their business if they set up a board.
But if you put careful thought and consideration into forming a governance team, you’ll find your board will empower you to make better, more informed decisions — and support you to see your plans through.
Good governance can help you:
These types of board have different roles and responsibilities.
|Advisory board||Board of directors|
|Provides support and advice to the owner without having any legal obligations or sway.||Takes on significant legal and management responsibilities.|
|Therefore a good small business development tool.||More committed to the success and longevity of a business.|
|No control or decision-making powers.||Can instruct management to take action — and manage, direct or supervise the business.|
|More informal and flexible.||Major responsibility for the business’s success.|
|No legal obligations or duties to the business.||Legally responsible to act in the best interest in the business.|
|Usually appointed by the business owner.||Usually appointed by shareholders.|
It’s important to clearly communicate what kind of board you have from the outset, so everyone knows their duties and limitations.
For more on the differences between advisory boards and boards of directors, see What is a board? (external link) on the Institute of Directors’ website.
There are two types of directors on a board, executive and non-executive, and two types of non-executive directors.
Boards should be diverse — your members should represent a broad range of experiences and aptitudes.
When you set up a board, define what sorts of expertise you need to succeed. Look for directors or advisors who fit the bill.
Many businesses look for board members with experience in:
Everyone on your board will wear different hats, bring a range of skills to the table, and complement each other’s skill sets.
You won’t know a person’s full breadth of expertise until you’ve worked with them for a while, so don’t rush to put together a full governance team straightaway.
Members should cycle in and out. You should bring on new ones with different skills depending on your current goals and needs. There shouldn’t be anyone on your board who doesn’t add value.
How to set up a board (external link) — Institute of Directors
Good advisors and directors:
Many businesses find board members through networking platforms, eg Linkedin, or online databases. You can also advertise roles on Institute of Directors.
Don’t rely on reputation and experience alone. Interview any potential directors or advisors. Validate their expertise and get a feel for their working style, motivations and expectations. Strive to be objective in your appointment process.
Director vacancies (external link) - Institute of Directors
Board members are an integral part of your team.
If you aren’t ready for a more formal advisory board or board of directors, there are people and programmes to build leadership skills.
Seek support from:
There’s also a wide range of business advisors to help you in specific parts of your business.
You can also develop you own strategic and governance cababilties. The Institute of Directors provides knowledge and training to develop your director skills (external link) .
This means taking a strategic view of your business, rather than focusing on day-to-day operations.