Decide if a board is right for you
Setting up a board could be a smart move if you’re a start-up with several shareholders and investment backing or have gaps in your skills and expertise.
It’s also worth considering if you’re growing rapidly, planning a major acquisition, or going through a big restructure. A board can be especially helpful when you’re thinking about succession or starting to plan your exit.
A business advisor or mentor can help you decide if it’s the right step for your business.
Benefits of a board
A board won’t take the control of your business away from you. It empowers you to make informed decisions and follow through on plans.
It helps drive your business forward, spot risks, and find new opportunities.
Boards support your leadership growth, offer objective insights, and guide strategic direction. In family businesses, they bring independent thinking, and they can also open doors to valuable networks.
Advisory board versus board of directors
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. |
| 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.
Executive and non-executive directors
Boards often include both executive and non-executive directors, which creates a good balance.
Executive directors:
- work in the business
- bring detailed knowledge but need to switch between their management and governance roles.
Non-executive directors:
- don’t work in the business
- offer an outsider perspective and are free from internal politics, which helps with objective decision-making
- can be independent (no strong ties to the business) or dependent (for example, former staff or major shareholders).
Aim for about half your board to be non-executive to stay balanced and accountable.
Board of directors and its benefits
Role and responsibilities
A board of directors helps guide big decisions, keeps the business financially healthy and reduces the risk of insolvency.
Each director has legal and ethical duties and must act in the best interest of the company.
The board doesn’t run the business day-to-day but provides oversight, sets strategic direction and monitors performance. It identifies risks and opportunities, plans how to manage them, and advises on leadership and pay.
The board is legally liable for its actions and can pass formal decisions. Ultimately, it’s responsible for helping the company succeed.
Board chair
The board chair sets the tone, keeps meetings focused, and earns the trust of other directors. They prepare the members for each meeting, guide the agenda, and ensure all voices are heard.
Although the chair may have strong opinions, they must stay neutral during discussions. Any decisions they support must reflect the board’s collective view, not just their own.
Directors
A well-rounded board includes executive and non-executive directors, with skills in areas like law, finance, marketing, HR, operations and risk. Industry and international experience are also valuable. An odd number of members helps avoid voting ties, while the right mix of expertise supports strong, balanced decision-making.
Benefits of having a board of directors
A board helps share your workload, offers objective decision-making, and brings fresh expertise, networks, and big-picture thinking. It adds structure, boosts creditability, and shows you’re serious about growth. Independent directors can help avoid conflicts, and some may even become future investors if they believe in your vision.
Advisory board and its benefits
An advisory board gives expert advice without having any legal responsibilities. The kind of advice depends on your business – it could be financial, technical, scientific, or something else.
Because advisors aren’t involved in daily operations, they can offer fresh ideas and honest feedback. Setting up an advisory board is a great first step towards stronger governance.
You can form one for broad governance or to focus on a specific issue.
An advisory board can offer guidance on day-to-day and big-picture decisions, as well as help improve your operations.
It acts as a sounding board during times of growth or change. They can also encourage you to think long-term, help shape products or services and boost your confidence and credibility with others.
Build your board
You can set up an advisory board, a board of directors, or both. A strong board includes people with a mix of skills and experience.
Start by identifying the expertise your business needs – like strategy, finance, technology, capital raising, risk, or industry-specific knowledge. Then find people who match those needs.
Board members should complement each other and bring fresh perspectives. Take your time building the right team – there’s no need to rush.
It’s also smart to refresh your board over time. Bring in new members as your goals change, and make sure everyone adds real value.
Being and finding a good board member
A good board member speaks honestly, listens well and brings diverse perspectives. While experience matters, a range of backgrounds and ages helps you see all sides of an issue.
Each board member should:
- understand your industry
- know relevant laws
- communicate clearly
- think strategically
- bring integrity, trust, and commitment
- offer support, skills, and solutions without taking over
- be accountable
- understand your challenges
- work with you to help the business succeed.
You can find board members via LinkedIn, director databases, or by advertising through the Institute of Directors.
Don’t just choose someone based only on reputation. Always interview candidates, check their experience, ask how they work, and make sure their values align with yours. A thoughtful, objective process will help you build a strong, effective board.
How a board of directors makes decisions
As the business grows, the board must show it’s making informed, well-considered decisions – not just relying on instinct. This means having clear, consistent processes for deciding what to focus on and how to make decisions.
Boards don’t need to discuss everything – just what matters most. They might vote or aim for consensus, depending on the issue.
Directors need to understand the bigger picture before making a call – like competitor activity, customer response, past decisions, and future impact. This context should be included in board papers.
Once a decision is made, it must be clearly understood by everyone and recorded in the minutes. This helps track progress and shows the board is meeting its legal obligations.
Basics of board meetings
Set the right frequency
Board of directors’ meetings take place regularly. Choose a timing that suits your business, anywhere from once a month to once a year. You may also need to call a meeting when a major decision needs to be made. Advisory boards’ meetings can happen whenever your business needs specific governance advice.
Keep meetings focused
To make the most of your members’ time, keep each meeting tightly focused. For advisory boards, shorter sessions are more effective, and members may not need to be involved in every topic or session. For boards of directors, sessions can vary. For either type of board meeting, build in a short refreshment break to keep everyone energised.
Set a clear agenda
Give directors time to prepare by letting them know what you’ll discuss in each meeting beforehand. An agenda will help you structure each meeting and make the most of everyone’s time. Don’t have too many items you want to discuss. Cover the most important issues first and allow more time for complicated topics.
Take minutes
Minutes are an official record that show directors are fulfilling their duties and responsibilities. They must be an accurate reflection of what happens in meetings. Be sure to record any important decisions, or difficult or complicated issues facing the business.
Minutes don’t have to record every word of the meeting; they just need to summarise inputs from board members and record any action points.
Provide board papers
Board papers are written by people in the business to inform, update or seek decisions from directors. Keep them short, clear and send them at least a week before meetings. Typical papers include minutes, CEO’s report, financials and conflict disclosures. Each paper should explain the decision needed, the recommendation, reasons, risks, and who was involved in preparing the paper.
Download a board meeting agenda template
Recognising the efforts of board members
Not all board members are paid. For those who are, you can offer a fixed fee or pay per meeting, so their input only becomes a cost when needed.
Some may volunteer their time – especially retired professionals or those looking to stay involved. Advisory board roles are often unpaid, with recognition as the main reward. You can also offer ‘in kind’ rewards, like company shares, professional development, referrals to other boards, or public thanks.
Whatever the arrangement, be upfront about what you can offer, what they’re looking for, and what you’re open to negotiating.
Common mistakes
Keep an eye on these common mistakes when considering forming a governance team.
- Choosing board members who are experienced, but don’t fit your company culture.
- Bringing on friends or family as board members who don’t have the expertise you need.
- Letting costs be a barrier.
- Not cycling board members in and out.
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