Getting the Most From Outside BOD Members

Mar 08, 2004

I recently agreed to serve as an outside member on the board of directors (BOD) for one of our client companies. This is not the first (nor probably the last) time I have done this. It is rare, however, to do so in a voting capacity. Most of these positions are simply as an advisor. In any event, I think this firm is getting a lot of out of me and its three other outside BOD members. It got me thinking about what firms really need to do to get the most from their outside directors. Here’s my thinking, in no particular order of importance: Build the right board of complementary backgrounds and skills. I realize that the board is elected by the shareholders, but in most cases there is still a considerable amount of control that can be exercised over who gets on the ballot. In any case, it’s good to get directors with different backgrounds so that each brings something unique to the table. For example, on this one particular board, there is an investment banker, an international businessperson, an architectural school dean, and myself, in addition to diverse inside company members. This keeps the discussion lively and provides for a full airing of differing points of view. Have clear agendas for the meetings. Nothing is worse than a BOD meeting that does not have a clear agenda. It will drag and inevitably result in the BOD meddling with trivial operational details that are not its primary focus. It’s the chairman’s responsibility to set the agenda and see that it is followed. Set the meeting schedule well in advance. Outside BOD members (and inside members as well) are busy people. Their calendars fill up long in advance. If you want to be sure to be able to get all of these people together two or four or six times a year, you need to plan for all meeting dates a year in advance. Send out all meeting materials in advance of the meeting. Let the BOD members read all they are supposed to read in the way of background information prior to the meeting. And make sure they get it a week or so in advance. The night before may not be early enough time for them to read it all. Have interim telephone discussions. Why not have a monthly conference call where the business from the last BOD meeting can be reviewed and the agenda for the next meeting discussed? It just seems to make sense to keep the communication flowing— these meetings don’t have to be long. Keep the BOD members continuously informed on how the firm is doing. Besides the monthly teleconference, having some weekly communication in the form of a financial summary, as well as information on how the firm’s marketing efforts are faring, is invaluable. No surprises when the next BOD meeting is held and the financial results reviewed. It all happens faster and smoother with less discussion about the past and more on what is going to be done to create a better future. Allow the firm’s staff some opportunities to interact with the BOD. I learned this through my activities on the advisory board of my alma mater’s College of Business— the students wanted a chance to talk to the BOD. Same thing with a design or environmental firm. The employees want to talk to the BOD. They want to know what they are thinking about the business. You need to have lunches, or cocktail hours, or panel discussions with your employees and outside BOD members to give each exposure to the other. Have a chairman who knows how to treat people respectfully and keep the board focused on its true mission. The right chairperson is invaluable to having a smooth board meeting where a consensus is developed and everyone’s best contributions can be made. One very important role of the chairman in a typical A/E/P or environmental firm is to decide how much or how little in the way of “non-agenda” contribution is desired from the BOD members. The chair then needs to deliver the message to the BOD members accordingly. Tap into each outside member’s connections. Outside BOD members know a lot of people. Some of these people are in other firms and some are in potential client organizations. Use these connections when you can to expand your management and marketing resources. It just makes sense. Pay the outside BOD members. They are busy. Their time is valuable. You will probably get more out of it than they do. Have officers and directors insurance. No one wants to get sued, but if an outside BOD member gets sued, they should be protected by the firm. Sell them some stock. It doesn’t have to be a lot. But you may be surprised that your outside BOD members would like to have “a little skin in the game.” Why not let them if your bylaws allow you to? Change out the BOD members who fall asleep on the job or who don’t have good chemistry with the others. Don’t be afraid to make a change if things aren’t working out. I still see a lot of resistance to outside BOD members in design and environmental firms. Some founders or major shareholders are fearful of losing control or of having someone tell them that the emperor has no clothes. I think the fear is, for the most part, unjustified, and that the benefits far outweigh the costs. Originally published 3/08/2004.

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