For many companies, the creation of a board is an important step in adding value to an organization and ensuring that sound business decisions are made, and for all U.S. corporations, boards are required. However, recruiting the right board members is a daunting proposition for many, and the consequences of recruiting less-than-stellar board members can be far-reaching.
A good board member can serve as a mentor, while a good board can serve as an advisory committee providing insight and expertise that you or your senior executives might be lacking. Corporate boards have many roles; they appoint chief executives, evaluate dividends, recommend stock splits, oversee mergers and acquisitions, and much more. Since a corporation is owned by shareholders, it’s unfeasible to expect them to run the business; as such, the chief duty of a corporate board is to protect the shareholders’ assets and ensure a return on their investments. Regardless of the type or size of the company, a solid board is used by organizations for strategic planning purposes, brainstorming sessions and recruitment aid.
It should be noted that a board of directors and a board of advisors are two separate entities that are not interchangeable. For small businesses, a board of advisors might be a better option, as it is less formal than a board of directors. However, the principles of recruiting board members are the same whether for a board of directors or a board of advisors.
How can you ensure that you find and attract the right board members? What are the traits you should look for? The first thing you must do when determining who to recruit for your board is to analyze what skills or talents your organization may be lacking. This list can serve as a veritable board-member recruiting checklist. In fact, it’s best to view your board recruiting similar to how you manage senior executive hiring. Here are some questions to ask yourself and your senior execs when selecting your ideal board members.
Where Do We Need Help?
This could be in relation to different departments in the organization (e.g. finance, marketing, technology, etc.), or it could be more specific to individual needs, such as guidance for the CFO or CEO. This is especially important if your executives are new to their positions and may feel more confident working with a mentoring board member.
Who Can Make the Biggest Impact?
Recruiting a board of directors might not be so much about finding experts on specific topics, but more about finding people who can raise your company’s business profile or make an impression with potential investors and/or customers. Recruiting members who may have connections in specific areas where your business is looking to grow is another way to exercise your board’s power.
So, you may ask yourself, what is the best way to recruit excellent board members? Here are some tips to get the most out your board recruiting process:
1. Set Clear Expectations for the Role
Before you can successfully recruit appropriate board members, you need to fully understand what value you’re hoping to receive from them as part of their service. Approach the recruiting of a board member as you would the recruitment of an employee. Similar to hiring a senior executive, you want to clearly outline what skills and expertise you desire in a board member.
2. Determine What Type of Commitment You Will Require
Similar to your expectations, list the type of commitment you expect of potential board members. Most businesses require that board members serve a limited number of terms so that the board can have a fresh influx of talent and expertise on a regular basis. Additionally, you’ll want to be sure you give your board members enough to do. Clearly outline the number of days a year you’ll require their input and what form that input will take. How many board meetings will they be required to attend? Where will the meetings be held? Corporations are required to have at least one board meeting per year, but it’s recommended to have at least quarterly meetings. These meetings should be detailed in your corporate bylaws and recorded with meeting minutes, and any impromptu meetings should be held with at least 10 days of advance notice.
3. Put Them to Work
The majority of board members want to feel useful and want to be assigned tasks or goals that further the company’s objectives. Many board members will leave or resign if they feel they aren’t being used properly. While the opposite can be true (they may resign because they feel overworked), more often than not, business leaders are afraid of alienating their board members and don’t utilize their services enough to keep them engaged.
4. Practice Business Transparency
Keep in mind that your board members can only provide value and insight when they understand the full picture of your business, including all of its strengths and weaknesses. Offer your board exposure to the inner workings of your business and the issues you’re hoping to resolve. If you hesitate to share these types of details with your board, then it’s time to reexamine your board members.
5. Seek Out Board Members From a Variety of Sources
Board members can come from many different disciplines and walks of life. Some of the more popular places to recruit board members include:
- Networks: Your local Chamber of Commerce is a fertile recruiting ground and a well-connected mouthpiece for announcing your openings.
- Websites: There are select websites that offer matching services for companies and potential board members. Examples include BoardnetUSA, VolunteerMatch and Bridgespan (formerly Bridgestar Group).
- Professional Organizations: If you live near a major metropolitan area, there are probably local chapters of many different professional organizations, even ones that cater to your business. Joining these organizations and regularly attending meetings puts you in direct contact with potential board members.
- Recent Retirees: Scan your local newspapers or trade publications for recent retirement announcements.
- Colleges and Universities: Faculty, professors and administrators are a wonderful source of board members.
6. Mine Your Current Relationships
While it may not be wise to create a board that consists of your close friends or family, there is nothing wrong with recruiting members who you or other executives have a previous relationship with. Maybe your favorite college professor is a retired executive with a wealth of specific knowledge you value. Or your uncle is a small business owner who has offered you guidance and support throughout the creation of your own business. Asking either of these people or both to serve on your board is a nice way to say “thank you” for the insight they’ve already provided, as well as a way to acknowledge the expertise they can bring to your organization.
7. Establish an Incentive Structure
How you compensate your board members is solely at the discretion of you and your organization. Some common incentives include:
- Shares of Company Stock: This is probably the most popular option. Determining how much stock to award board members can be based on length of service, capital investment in the company and special expertise or knowledge.
- Expense Reimbursement: Regardless of other types of compensation offered, you should always reimburse board members’ expenses when they are doing business on the behalf of the company.
- Cash Stipend: Stipends can be determined based on merit (such as meeting certain goals), or a specific annual stipend amount can be set for all members.
Identifying and recruiting excellent board members can take time and energy. It can also become a bit overwhelming, as the process might take longer than you think. If your company can afford it, consider hiring a recruiter. Even though your board members are not technically your employees, you want to treat their recruitment and retention just as you would any other team member. Look for people who bring value, experience and commitment to your organization and its mission, and you’ll be sure to create a solid board of directors.
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