Board of Directors: When to have One, How to Select Members & How to Make them Work for Your Bus
A board can help jumpstart a business that needs to become more competitive.
Owning your own business means being the master of your destiny. Many people get into the portable sanitation business for that reason alone. So if you like making your own decisions, why in the world would you consider hiring a board of directors? The main reason is that even though you make all the decisions, you don’t always have all the answers.
There are many places you can turn to when you need advice on tough business questions including the Portable Sanitation Association (PSAI), the Small Business Association (SBA), your PolyJohn Area Manager, your lawyer and/or your accountant. Sometimes the best perspective on your question is going to come from people with business experience in your local arena, the kind of experience that you can hire and keep available on your board.
What’s more, if you run a business with one or more partners or family members, a board can provide an impartial voice to help find consensus and resolution when not everyone agrees.
While it’s estimated that less than 15% of family businesses use a board of directors, the trend appears to be growing because the benefits versus the costs of a board can be considerable.
Who Needs a Board?
A board provides stability for any business that is undergoing significant change or mergers. It helps break deadlocks in companies that have internally competing interests such as partners or family members who don’t always see eye-to-eye, or competing business segments such as septic service and portable restroom service. And, a board can help jumpstart a business that needs to become more competitive.
Companies that have been growing rapidly or preparing for growth may also benefit from the wisdom and experience of a board of directors, since growth often brings growing pains that need to be worked out.
How to Organize a Board of Directors
The first step in organizing a board of directors is to decide what you expect the board to accomplish for your business and how you think they should go about it.
Start by developing a mission statement that gives you—the owner, your partners, key managers, and the board members a specific outline of roles, responsibilities and expectations. Here are some roles you might expect your board to serve:
• To meet quarterly and review operating issues.
• To provide independent advice to owners or managers with consultation available as issues arise.
• To bring specific knowledge and/or experience which the company may currently be lacking.
• To provide an independent point of view to help resolve disagreements among partners, family members or key management figures.
• To suggest ideas that enhance operations, marketing, management style, and growth strategies.
• To review critical financial data and record-keeping procedures.
Who Do You Appoint to a Board, and How do You Find Them?
Generally, the best people to appoint to a board are those who have some experience related to your business and whose opinions you would trust. It is also important to find people with various backgrounds who would bring their own unique perspectives to discussions about your business.
Many times executives who have retired are looking for a place to make a continuing contribution to business, without making a huge commitment of time. Ideally, for a portable sanitation company, you would look for people who would have some insights from your customers’ point of view. Look for former construction managers, builders, former local government officials or event planners. Also consider marketing executives or sales professionals who can provide insights into developing your market profile or selling to new customers. If you know anyone in your area who formally owned a portable sanitation business, they would also be a great resource to tap.
The people to avoid appointing to your board are your fishing buddies, close relatives, or people who want to grow their own business through more business with yours such as your lawyer, banker, or accountant. A useful board will provide an unbiased opinion, not a rubber stamp to your ideas.
If you don’t know anyone personally who fits your criteria, try asking at the local Chamber of Commerce or SBA office if they know anyone who might be interested in assuming a position on your board. One very resourceful group is Americorp made up of retired business managers who consult for free and/or a small fee.
Before appointing strangers, interview them thoroughly. Find out about their work background. Do they have any experience building their own businesses? Ask them some challenging questions and see how they respond. If their answers impress you with their thoughtfulness, they’re probably a good choice.
Here are some other attributes to look for:
• Wisdom and intelligence.
• A well-respected reputation in the business community.
• Experience in one or more areas of value to your company.
• Compatibility with other board members and company leaders.
• Proven ability to lead and generate new ideas.
• Enthusiasm and sincerity.
Put It in Writing
Once you have found suitable board members it is time to structure an agreement with them. The matter of payment can be negotiated on an individual basis. You might decide on an hourly rate, a monthly retainer that pays a fixed amount each month, or a combination of the two.
Be sure to have your lawyer draw up a contract that includes a confidentiality agreement with a non-compete clause. Your board members will necessarily learn a lot about how you run your business, so you wouldn’t want them talking to your competition or starting their own sanitation business across town.
Your First Meeting
Once you bring your board together for the first meeting, you’ll want to have a firm agenda of topics in place. You’ll find as you begin to work through the issues facing your company that the fresh thinking your board can bring to the table will be invaluable. You’ll see why most large corporations rely heavily on their boards. And you’ll wonder how you ever managed your business without one.