Who should you have on your board of directors?

A strong business can be made even more so if you have a diverse, skilled, and supportive board of directors behind it.

Choosing the right board members is probably one of the most challenging tasks your company will face.

There is an art to assembling a team of advisors that can drive strategy, mentor and guide your executives, deeply understand your culture and play nicely with each other in and out of the boardroom.

The right board will drive your strategy, broaden your perspective, add value and identify obstacles and opportunities.

So, who should you target?

• You want people with different perspectives. It is really important to limit the number of insiders and key managers in the boardroom.  You want to be able to have frank discussions, not groupthink.  Diversity matters – make sure your board reflects the range of stakeholders.
• You want people that will challenge your assumptions, not your friends and family. The boardroom isn’t about celebrating your accomplishments, it is about forcing you out of your comfort zone. It is about confronting strategic challenges or difficult decisions that require courage and commitment to a new path.  Everyone is facing the turbulence that the digital transformation has created, forcing many companies to leave behind treasured old ways to seek those new paths. A good board can help.
• No Rookies. Your board isn’t training camp for a sports team.  You want experienced directors who know how to guide you and your team on your journey.
• It is vitally important that your board helps you look through the front windshield, not the rearview mirror. It is tempting to get people who know your industry intimately. That can be a dangerous trap. Retired managers from your industry can be limited by what worked yesterday, and not necessarily expert in what will work tomorrow. In seeking industry expertise for your board, think about cousins to your business. Think about suppliers and customers, but not people who are doing exactly what you are doing. Diversifying the voice in your boardroom will make you better and smarter.
• Board members with strong networks. A board member is not a salesperson in disguise, but their networks should be an important factor to the contribution of the company’s success. They may have better access to resources and relationships – don’t be afraid to use them.
• Target a Great Manager with Strategic Vision. The future can be a scary place. Having board members that have already climbed the mountain can help reduce the fear of the unknown.  Success requires vision and imagination.  It is really helpful in a boardroom to have someone that has a big set of binoculars for eyes that can see far and wide about what is going to happen to you and why.  But vision is not enough.  Vision without execution is a daydream.  Execution without vision is a nightmare. So, in order to combine both vision and execution, a talented and successful manager who has sat in your chair and confronted those challenges in their own business, even if it is unrelated to yours, can be a valuable voice in your boardroom.

Decide how many directors you want

Each private limited company must have at least 1 director (2 directors if you are a DAC).

After that, how many directors you add is really up to you.

In reaching this decision, you’ll ideally want to consider what you (and any other fellow directors) need, what the business needs (e.g. is there an expertise or skills gap that you’d like to plug?) and who are the candidates that you might want to invite onboard.

Decisions from a well-balanced board, in number and skills-set, tend to inspire confidence in a business, and more easily evidence that decisions are more considered and well-informed.

So, while when you start out, you might be the only director, as you start to get underway, and especially as you grow, seek funding and start selling, it may be sensible to have a few more than the minimum.

But don’t rush to fill numbers if there really isn’t anyone yet with whom you’d want to sit around the table and solve problems.

It’s not a game of numbers.

Business strength comes from having the right people around the table, (or simply in your close network, in other key employee roles and/or perhaps not at the table itself at all).

It is not achieved by a magic number of board seats being filled.

And always ask yourself whether a prospective director shares your work ethic, enthusiasm for the business and is likely to contribute the same level of value as you and any other directors do.

If you’re underway and generating some nice revenues, some commentators take the view that 7 directors or fewer strikes a nice balance between too many or too few.

But at the end of the day, it’s about what works for the business.

Fewer may be absolutely fine, more might be genuinely necessary.

Cover the right bases

While you can likely bring a lot to the table in your business, it can be hugely advantageous to appoint directors that have expertise in areas you don’t.

Try to have directors specialised in different part of business management, e.g. finance, HR, marketing, technology, sales, etc.

It’s also best to have a board that’s balanced and diverse in personality too.

There’s plenty of research to show that this increases productivity and helps create a strong and considerate employee culture too.

Check they’re eligible

Conditions around age

Directors must be at least 18 years old.

Previously disqualified or legally ineligible directors

Disqualified directors cannot be appointed as a director of another company during the period of their disqualification, without the permission of a court.

Directors may be disqualified for a variety of reasons almost always related to previous unlawful or reckless conduct while they were a director of an earlier company.

Reasons for disqualification include allowing a company to continue to trade when it hasn’t the money to pay its debts, not keeping proper accounting records, not paying tax and embezzlement of company money.

Disqualification can last up to 5 years, during which time, the disqualified individual cannot be a director of an Irish registered company or otherwise be involved in forming, marketing or running a company.

An individual also can’t be a company director if they’ve been declared bankrupt and have certain restrictions placed on them.

The seriousness of this should not be overlooked.

Because if you appoint someone disqualified without the permission of the court, you could be prosecuted and become personally liable for your company’s debts, if you act on instructions given to you by a disqualified director.

Even if you were to gain the permission of a court, the fact that you want to appoint someone who is currently disqualified will inevitably invite unwelcome speculation and doubt about the wisdom of your choice of candidate, and potentially the wisdom of other decisions you’re making.

There are always going to be exceptions, but those cases are just that: very rare.

Consider non-executive directors

These are directors who aren’t involved in the day-to-day running of the business but are valuable to the company in the way of specialist knowledge, contacts or investments.

If you choose to have a non-executive director on the board, make sure you have an agreement before they join, to manage expectations on all sides and to provide the right clarity and protections as you’d normally expect when bringing someone into your business.

So now you know what to look for in your directors, where can you find them?

The first place to look is within your current team and those involved in your business through collaborations and investments.

These people already understand and care about your company, and you may well find your entire board can be populated here.

But if you’re only a small team and have few relevant contacts, where can you go to find your directors?

You could try to meet potential board members organically through networking events or by asking trusted advisors such as your accountant, solicitor, or trade associations.

Alternatively, you could use a recruitment agent or post an advert to source potential candidates.

When you think you found some potential candidates for your board, you should treat the selection process in the same way that you would when recruiting an employee.

So that means reviewing their credentials, meeting up with them to see how you both gel, and thinking about how their expertise will enhance and complement your board.

And then, to get them off to the best possible start, on day one, make sure they have a recent copy of your business plan, minutes of board meetings to date, and introduce them to their fellow board members.