Many entrepreneurs fear the idea of forming a board because they don’t know what to expect. What they aren’t realizing, however, is that boards can provide value in ways you might not imagine. In an earlier piece, I discussed eight benefits of having a board – many of which are common sense, easy to understand points. This month, we’re delving into some potentially unexpected benefits based on my first-hand experiences as a board member. Although the outcomes to each of the following situations were positive, the stories would have ended differently had there not been a board in place to help the business owners succeed.
Three Unexpected Benefits of a Board
#1: Third-Party Mediation / Relationship Repair
As a board member for a small, private franchise company, I played a critical role in helping the organization save its relationship with its accounting firm. At the time, the company owed the firm quite a bit of money, yet they still expected and needed the work to be completed. The firm was holding back until payment was received and both sides were blaming each other and getting hostile.
Because I had experience navigating these types of difficult business relationships, I asked the company for permission to work with the accounting firm in an attempt to get the relationship back on track. By getting both sides to take some responsibility for the situation, and with a realistic approach to resolving the balance owed, I was able to work towards a compromise that represented everyone’s best interests. Had they not had that outside perspective, I’m sure the relationship would have blown up, and the company would have needed to start over with a new accounting firm – an alternative that would have been significantly more time consuming and expensive than the mutual agreement we created.
Takeaway: Board members who are good negotiators can play a key role in navigating difficult relationships between your company and outside vendors. Because they are unattached to the outcome and familiar with the personalities involved, their ability to be objective is much greater than someone inside the company.
#2: Developing an Emergency Plan
While I was serving on the board of a company, the owner became unexpectedly ill. Thankfully, we had taken the time beforehand to create a disaster plan that outlined precisely what should happen in the event he was unable to continue leading the company. With that plan in place, I was able to reassure the owner’s wife that the business was in good hands. This allowed her to alleviate the anxiety and devote her time and energy where it belonged: on her husband’s recovery.
Takeaway: Taking the time to develop an emergency plan and discuss the “what ifs” is important to protecting a company’s long-term interests. This conversation doesn’t need to go beyond the boardroom, but management and the owner’s family should know that a plan is in place in case it becomes necessary. Not only will this plan help build confidence internally, but it also creates an insurance policy-like feeling for the owner and his/her family so they can focus on their health – not the business.
#3: Maintaining Accountability
Years ago the owner of a board I served on became ecstatic when a competitor expressed interest in his organization. Immediately, he started generating materials for the company so they could review the financials and other data prior to making a decision to buy. As his board, we suggested a different approach: hold off on sharing any sensitive information until you can verify the offer is sincere.
As it turned out, the offer was nothing more than an attempt to fish for a competitor’s information – the company had neither the desire nor the financial means to make a serious offer. Thanks to our initial skepticism, we avoided an unhealthy disclosure of information and created a great deal of frustration among the phony buyers.
Takeaway: A board can run interference when opportunities arise so that they don’t distract the owner from what’s really important: the performance of their business. These types of distractions are particularly common among entrepreneurs, who have a tendency to chase new opportunities without thinking about how well they fit with their stated goals.
From possible litigation to decreased productivity, the outcomes in each of the above situations could have been drastically different if a board hadn’t been in place to help the business owners stay focused. If you’d like to hear more about how a board can benefit your organization, please send me an email and we’ll schedule a time to talk about your situation.
