Your First “Outsider” Board
Do’s and don’ts for success.
Many private companies are considering the establishment of their first true fiduciary board as they think about their futures in a world full of change, new challenges and opportunities, and leadership and ownership transition.
I recently served as chair of a conference focused on educating and supporting privately held businesses in their journey to a high-performance board. A common question and topic of high interest was “How can independent directors, aka outside directors, be of value and most successful in our new board governance efforts?”
Having had the honor of serving on some great boards in many different settings and circumstances, I thought I would share some crucial best practice do’s and don’ts from those first “outsider” board experiences.
Setting Up Your First “Outsider” Board
• Crystallize and communicate why you are forming a board with outsiders and its purpose and charter, informal or formal. Clarity in board oversight, principles and processes will serve as an essential organizing framework. This is not form over function but just enough form that will enhance function. You can always evolve your processes to be more effective as you see what works for your business.
• Add a very limited number of the right outsider board members at the outset. Outsiders can be tremendous value added but also potentially excessively disruptive. Oftentimes, the best approach is simply to add no more than two outsiders to begin — you can always selectively make additions later when needs get clearer. The first outsiders should also have served in this setting before and have both practical board process insights and a range of functional business building experience. They should have a real passion for helping the company and supporting the leadership through courageous discussion and constructive advice.
• Have an effective chairperson, who can focus on the charter and how to facilitate the “airtime” of new voices so discussions get the full benefit of a small, diverse team.
• Don’t add first-time directors who have to learn on the job or see this as an opportunity to do consulting projects or enhance their resumes. You can buy expertise and talent but you cannot replace insight and judgement. There is simply too much at stake for your first outsider board.
• Don’t add “name” directors who won’t do the hard work necessary to learn the business and be effective on a first time outsider board. The last thing you need is a retired second-guessing, Monday morning quarterback who thinks your company should be run just like the one they came from.
• Don’t be afraid to use individual board members for a sounding board or consultative perspective on issues you are processing between board meetings. Sometimes this is the best and most valued thinking on important decisions.
How to be Most Effective as a First “Outsider” Board Member
• Always listen, listen, listen. This is especially important early on as the new board gels and learns how to work together. Remember the old adage, you have two ears and one mouth. Great listeners also get heard the most when the discussion really matters.
• Learn, learn, learn. Spend the extra time early to truly understand and connect to the business, not just in the boardroom. Ask questions, talk to various stakeholders and develop the base from which you can most effectively discuss issues and offer insights. Ask for good onboarding and suggest ways to do so without being burdensome.
• Invest time in relationships with all your fellow board members individually and collectively. Board team culture, mutual trust and shared commitment to the company’s success are critical for good honest debate on big topics.
• Don’t be so overzealous in trying to be helpful that you overwhelm the discussion or management, or worse yet, slip perilously into management’s responsibility.
• Don’t be so fixated on board oversight that you become adversarial to management, real or perceived. You don’t have to be a “know it all” or “badass” to be effective. Influence is gained when you are constructively insightful and ask thoughtful questions.
• Don’t dominate the discussion. You really need to manage your own “airtime.” On the flip side, don’t be afraid to speak up on the right topics that you are prepared to weigh in on. There’s a reason you’ve been selected to be part of the board. In fact, if you pay attention to the do’s and don’ts highlighted here, you’ll be asked for your opinion and best judgement. ■
Don Yee has been CEO or an independent board member of numerous companies from startup to multi-billion dollar businesses. He currently serves on the boards of Blue Diamond (Private Company Board of the Year), Aerometals, OC Communications, Jake’s Finer Foods, Fat Family Restaurant Group, and NACD-Northern California, where he is Chair of NACD-Capital Valley and an NACD Board Leadership Fellow. He is also a member of the Private Company Director magazine editorial advisory board.