An owner asked me for advice about starting a board and asked several good questions.  Should he have one?  Who should be on it?  How do I invite them?  How often would they meet?  What fees should I offer?

His company has been growing nicely over the past few years.  He said that growth was challenging him in new ways.  He wanted to get the perspective of outsiders to guide him along.  He had been part of a peer group before and missed the insights.

A key question to ask as an owner- what drives your desire for a board?  Are you looking for guidance or do you need to put more structure in place?  How involved do you want the board to be in the business?  Do you want more than just advice, such as opening doors to customers, suppliers or the government? Would they have voting rights?  Are others requiring that you put a board in place- such as an angel investor, private equity firm, bank or other debt holder?  

Based on that, here are things to consider when setting up the board:

1. Board of Advisors or Board of Directors.  If you are just looking for guidance, a board of advisors could suit you just fine.  If you have outside money coming in (other than regular bank debt), then you probably need the board of directors.  Your attorney that set up your company could tell you what your bylaws require and if you have to go the director route.

2. What Role.  While a structured board of directors will tend to be more active, even there you have broad ranges.  Will you have committees set up- such as compensation or audit?  What decisions will require board approval- such as new bank lines, acquisitions, capital expenditures over a set level, annual budgets, etc.   Your attorney can help you as well, letting you know what your bylaws, bank or other agreements might require.  Another thing to consider is what happens between the meetings.  Ideally, you would like to be able to contact board members and bounce ideas off them or use them to help with introductions.

3. How Many.  You probably will keep it pretty small and normally an odd number.  I would suggest at least 5 and no more than 9 to start off.  If you are starting a board of directors for outside money is coming in, they may dictate how many seats they get and what voting rights.  

4. Who.  For a formal board of directors, outside money will get to say who gets their seats.  If you have family involved in running the business or as an investor (such as your spouse) you may have 1-2 spots going to them.  Beyond that, now is a great time to think creatively and consider who could bring in the perspectives and guidance to move your business to the next level:

a. Industry.  Experience from your industry can help but so can the perspective of outsiders which has transformed many industries.

b. Function.   What functions would complement your strengths and those of your team- do you need more guidance in finance, marketing, strategy, operations, etc.

c. Channel.  Come someone from an entirely different channel or conversely, from one similar to your core customer base help expand your thinking such as lines of business or customer groups?

d. Familiarity.  Should you invite current people involved, such as your attorney, banker, consultant or accountant to be on the board?  Alternatively, you have them sit on parts of the meetings without being full members.

e. Style.  You want different perspectives.  Otherwise if everyone behaves the same, why do you need the board?  I like to look at behavior styles using the DISC framework.  Ideally you want someone from each style on your board- Director, Influencer, Stabilizer and Calculator.  DISC is a separate topic- but can be assessed very quickly on two dimensions- task vs. people oriented and change vs. stability oriented.  Usually a board is not thought of this way- if you can get all 4 styles, you can get some interesting interactions and a board that can push farther.

5. How Often and How Paid.  I normally see 3-4 meetings per year, plus infrequent contact between meetings as needed.  Fees can be modest, based on the size of the company.   Usually they are doing it for the honor and to help, not for the money.  Of course, in this era, get the D&O insurance that they will need.

A board, advisors or directors, can be a big step forward.  The board can hold you and your team accountable.  They can bring new insights and stretch your thinking and strategy.  They can open doors and take you farther than you ever imagined.

Unfortunately it does not always work out that way.  Sometimes board meetings are just ceremonial, dog and pony shows.  They become another process just to get through.  The board just walks a straight and narrow path.  The CEO never gets challenged.  The big stuff never comes up.

It doesn’t have to be that way, but it’s your call.  Sure it is tough to put yourself on the line.  But think how much farther you can go.  As long as you are going with a board, why not put one in place that will stretch you.