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I'm a consultant and advisor  for social enterprises - using business to change the world.

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Eight Interesting Things I've Learned About Boards

Eight Interesting Things I've Learned About Boards

For the past three years, I’ve been lucky enough to serve on an excellent board as treasurer– for an organisation providing incredible community housing for people with severe mental illness.

I also work with not-for-profit boards who are looking to make their organisation financially sustainable.

It’s taught me a lot about governance, leadership and decision making.

Here are the eight biggest lessons I’ve learned, in the order I learned them.

1. Essentially, the CEO manages the company, and the board manages the CEO

Being a CEO is incredibly difficult.

You’re responsible for every decision within the business, faced with a barrage of problems and opportunities every day.

There are always people with more questions for you, and you don’t stop thinking about work even when you’re at home or on holiday.

It’s hard to get every decision right, and it’s easy to burn out.

Therefore, the CEO needs an external source of wisdom – a sense check – to help navigate rough waters.

This is the role of the board; to keep the CEO accountable, and ensure that they are making the best possible decisions for the company.

2. A good board is an invaluable asset

This is a huge strength for an organisation – to have a talented leader, who is then supported by a group of trusted advisors.

The board typically brings a mix of professional experience and personal support, in order to make the CEO’s role easier.

If the CEO starts to falter or is no longer the right person for the task at hand, the board are there to find the best possible replacement, to ensure that the organisation achieve its vision.

When it works, it’s a beautiful system.

 

3. It’s really easy to step on people’s toes

As you can imagine, it doesn’t always work smoothly.

That support and accountability can quickly feel like “marking your homework” or questioning the CEO’s judgement.

A CEO approaches board meetings tentatively, because without trust, it can feel like a performance review conducted by people who work at other random companies.

Trust is fragile, and needs to be deliberately built at every opportunity, especially when times are good.

The board are NOT responsible for management decisions, but that’s what board members are usually drawn to.

So instead of “How will we grow over the next five years?” you get more of “What colour should we paint the fence?”

 

4. Things go from mundane to terrifying very quickly

Board meetings, if run well, are efficient and a little dull.

That’s because you have a good agenda, covering all of the right topics at each stage of the year.

For example, you can predict when there needs to be conversation about the budget, the CEO’s review, the Annual General Meeting, the audit, staff surveys and strategy days.

Again, when things are good, this doesn’t feel exciting, and that’s ok.

Then you get the one-offs; urgent decisions that can make or break the business in the future.

It might be an incident that may be covered by the media, the resignation of a key staff member, the sudden chance to take over a competitor or an offer from a politician.

Without warning, the board is asked to make a call based on their professional gut-feel.

5. Every company is two bad decisions away from closure

They say each of us are two bad decisions away from being homeless.

Have a think about it and see if it’s true for you – a sobering thought experiment.

Companies can also be two bad decisions away from closure.

This is especially the case for decisions about staff/public safety, the selection of the CEO, failure to meet legal operating requirements through negligence, making inappropriate statements to the media, etc.

There’s benefit in being able to make good decisions under pressure, but this really highlights the benefits of making good decisions without pressure.

When the heat is off, that’s where proactive good decisions come into play.

This creates things like a positive culture, building up a cash surplus, boosting the brand’s reputation, making friends with influential people, and ensuring that the business is compliant with all relevant laws.

When disaster strikes, you’ll be glad you had these, because they can be the difference between a difficult month and insolvency.

As the old proverb says: When it’s sunny, build your shelter.

 

6. Most boards are dysfunctional

I’ve been part of a great board for several years, and have since worked with many other boards as they go through the transition from not-for-profit to social enterprise.

Concerningly, most boards are stale and awkward – a group of disengaged old people who get in the way of progress.

They were each invited by the old CEO, and aren’t proactive in helping the company thrive.

Instead, they interfere with management decisions, resist necessary change, and never talk to the team about how the business is really going.

The result? An under-supported, unaccountable CEO who can’t get their ideas heard.

7. You want a good lawyer and a good Chair

At university, all our group projects needed a “Diverse Team”, and not once did it work.

This was generally an opportunity to spread out the international students who barely attended class, and there was generally no difference between the accounting/HR/marketing majors.

It turns out, professional adults are different, and diversity on a board is a huge advantage.

If you’re starting a soccer team and could only have a few star players, you’d pick an elite goalkeeper – someone who prevents disaster, and a strong captain.

For the same reasons, a board should have a good legal mind on their team – someone who knows how regulators think, and who can spot problems before they arise.

They also want a great Chair, who knows how to get the most out of the rest of the team, and who sets the tone for all meetings and decisions.

 

8. Startup founders should be picky about their board structure

I see a lot of founders who want to rush through the board establishment phase, casually selecting a group of people who sound important.

You are choosing who has the ability to fire you.

Be careful.

That means you want more than three people, but probably less than seven.

Five is a good number.

You also want to ensure that each member “gets” the intent of the business, since they will be defending the intent from your bizarre future decisions.

 

If you have the chance to join a board, I highly recommend it.

You’ll gain a new appreciation for governance and management, and will be able to help a good company grow and thrive.

 

 

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