Board of Directors - Getting Added Value

Corporate Board of Directors can add significant value to companies, especially for start-ups and hyper growth companies. The expertise and contacts that Directors can bring add significantly to the financial and intellectual power available to a growing company. In fact many experts recommend that board members should be chosen both for the skills and business experience they bring.

For early stage companies prior to IPO investors may require one or more seats on the board to increase provide shareholder value with the company. Investors, whether they are individuals, representatives of venture firms or investment banks, become interested participants in the process of growing a company. For management teams looking for funding, care should be taken to ensure that any investor brings additional value other than just money to the relationship.

Creating a board and adding outside directors can change the dynamics of how a company is run. Nearly all companies can benefit from the involvement of qualified independent directors--and the sooner the better. Although advice from insiders can be valuable, it often reflects a narrow perspective--one company, one industry, as well as one set of issues and challenges. One big problem for strong leaders is that they develop people who tell them what they want to hear and not what they need to hear. This affliction is called "founders ego." One way to counteract this natural trend and increase the strength of your company is with outside directors.

Besides fulfilling the basic duties of a board member, additional and critical value can be added to help grow their companies. For example if you are about to enter into an acquisition you may want a board member who has not only been part of one, but made them successful (as of 2008 roughly 75% of all mergers fail to achieve their intended results). Key value-added benefits include expertise in relevant technologies, markets and other areas:

	Strategy development
	Additional outside expertise
	Additional investors and syndication partners
	Attract other stakeholders and management talent
	Provide contacts /access to information, people, institutions
	Identify suitable alliances, partnerships, acquisitions
	Key contacts with major new customers
	Access to key technologies and trading partners

Critical for new start-up and expanding companies, besides "seasoned leadership," board members can provide valuable help in growth but also in developing and executing exit or harvest strategies:

	Sale
	IPO
	Merger
	Liquidation
	Lifestyle income/capital cow harvesting
	Succession planning and execution
	Exit and build a new venture
	Joint ventures and alliances
	Employee Stock Option Plans (ESOPs)
	Leveraged or Management Buy Outs (LBO, MBO)

With outside directors as active participants and advisors to the business the entrepreneurial stress is spread among the entire team of management and the board. The outside directors can add value not only their expertise and contacts, but they can also add sound judgment, encouragement and inspiration. Recognizing this potential value may be harder if the focus is just on getting investors, but CEOs will do well to remember that few investors are truly passive and if someone is going to be involved, they might as well add value also.

Just as investors interview companies seeking funding, the company should be interviewing the investors to see what added value they can bring to the company. So besides checking personality and strategy fits, investors, especially those who require board seats to invest, should interviewed for business benefits also. This can greatly augment and even fill gaps in the existing board and management teams.

Copyright 2008 Donald C. Mann. All rights reserved

Don Mann advises CEOs and business leaders across the globe. In organizations ranging from start-ups to Fortune 100 he has delivered level-raising results of improved innovation, sales, profits and cash flow in good and hard times. His results include developing and improving highly productive and lean organizations with more rapid responsiveness, reduced stress and profitable customer delight. Sitting on a number of boards, he helps CEOs grow their companies and shareholder value. For more information, contact him at: www.RiteMann.com

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