Growing Companies Need Board Guidance Too

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An effective formal board of directors or informal advisory board is a valuable but relatively inexpensive source of advice to any company. In particular, small and medium-sized businesses can access a wealth of experts who offer critical, independent advice for better business management.

How boards add value to emerging companies

Directors for smaller company boards don’t need a rolodex of connections to contribute to company profitability and success. In a recent PwC survey of CEOs of emerging Canadian software companies, 75% stated that deep and broad advice was the most important benefit they gained from their board of directors or advisory board. Emerging companies also need boards that can mentor company management. In the PwC survey, 64% of CEOs want more coaching from their boards. Most respondents consider themselves effective problem solvers, but said they needed more personal guidance related to the ‘softer’ skills of managing a company.

Company size should not affect board effectiveness

Emerging company CEOs want boards that:

  • Provide industry experience;
  • Ask the right — and sometimes difficult — questions, and
  • Demonstrate integrity by standing up to the CEO when they are wrong.

Although small to medium-sized private company boards aren’t affected by regulatory requirements, directors should employ the same best practices required by their public company counterparts. Directors would be prudent to insist on boardroom best practices seen in the public company realm to unsure an ethical, productive and healthy company. Often a smaller company has the goal to be acquired by a larger fish. If this is the case, then to make the offer appealing having the financial ducks in a row is critical.

Why consider sitting on the board of an emerging company?

While many directors have traditionally sought the large public company boards to sit on — and in fact they were typically the ones that actually had a board — there is an untapped area in the emerging company space that could be personally and financial beneficial to Canadian directors.

However, it’s not the place for those who don’t want to invest the time and effort needed to guide a smaller business into a profitable future.

“If you just want to look at numbers and focus on the bottom line, then a smaller company is not the right place for you,” adds Mike Harris, leader of PwC’s Corporate Governance practice.

Directors of a small- to medium-sized company boards “should have imagination and vision,” Harris says. “Being able to see the potential of what a company could be down the road as well as the creativity to make it happen are essential.” It can be the place where many directors find a new niche and learn to grow their own experiences with the company as it progresses.