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How To Create a Board For Your Business (Part 2)


In my last post, I discussed the questions a business needs to raise before it can decide whether the time is right to establish a board.

If you’ve decided the time is right, there are a couple of obvious options.

Some companies may first set up an advisory board to provide independent advice on issues including business development and strategy.

An advisory board is not a decision-making entity and is not regulated under the Corporations Act, although advisory boards need to be careful that they are not in fact a governing board (because in this case the legal duties and obligations of a director might be applied).

An advisory board is often part of a transition process to a more formal, governing board with functions regarding risk, strategy, compliance and monitoring company performance.

Other companies create a governing board from the outset, which means the directors have legal duties and liabilities under the Corporations Act.

If you choose this path, first carefully consider the following key questions that we at Directors Australia ask all clients in this position:

  1. Is your business ready for the transition – both financially and emotionally?
  2. What will be the impact of loss of control and independence for the owner/s?
  3. Is the timing right given other things going on in the business?
  4. Are there family issues to be sorted through first?
  5. If it’s a family business, which family members will sit on the board?
  6. What is the ideal skill set to deliver on your company’s strategic plan and where are the gaps?

Selecting an independent director to suit your business

Many family and other SME businesses initially feel comfortable appointing known advisors or peers to an advisory board.

This can be a good mechanism to integrate ‘outsiders’ into the business.

As a business moves to a formal, governing board, it is important to draw in a wide pool of candidate directors who have experience in business, governance and strategic thinking.

It’s also important to not only look for people with the right skills and experience, but who are also a good cultural fit for the business.

In the family business context this means looking for someone who understands and can effectively work within the family’s culture, values and goals.

A good starting point to selecting the right directors is drafting a position description outlining what the board is ideally seeking.

This document should be at the core of the search and selection process.

It will need to cover:

  • Professional skills (e.g. financial, strategic marketing)
  • Personal attributes and behaviours (communication style, ability to collaborate)
  • Expectations (such as number of meetings, involvement in strategic planning and representing the company at industry events).

Kerryn Newton is a guest blogger and an experienced director and managing director of Directors Australia, a specialist board performance and board recruitment consultancy working with clients around Australia.

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