The most exciting day of my life as an entrepreneur was the day I decided to form a board of advisors for Lawrence Blake Group Int'l. Hiring new staff members is always exciting, but the truth is, you can never know how an employee will fit into the team, or if they will even enjoy working with you. The anxiety that begins to arise once you've noticed a new staff member isn't the right fit is enough to break your heart. That's why I made the decision to found a board of advisors. Board members are committed to your organization and are eagerly and actively overseeing its growth - something most employees may not have an interest in. Similar to a board of directors, my firm's advisory board serves as independent and objective advisors to the firm, selects and approves the hiring of executive team members, and oversees progress toward our strategic long-term goals.
Depending on the size and scope of your organization, you may or may not benefit from having a board of directors, or advisors. Generally speaking, if your organization has at least ten years of growth plans in writing, you will benefit from having a group of competent and experienced individuals by your side. On the other hand, if you're the founder of a business that you know has an uncertain future based on appropriate market research, you may not need to invest in founding a board.
I chose to create a board of advisors as opposed to a board of directors because my firm does not require voting to resolve tough issues. Instead, our advisory board makes recommendations to our executive team, who then make any final decisions. To better understand the differences between an advisory board and a board of directors, I’d recommend you read this presentation by PartnerCom.
Keep in mind that there are notable differences between the role of a board within a for-profit and non-profit organization. However, generally speaking, a board will serve as a means to acquire new business, whether new customers or donors. At a non-profit, a board also creates a new revenue stream, as you may option to require a minimum donation per board member. At a for-profit organization, a board can serve as a revenue stream as well, if it is arranged to include only members with investments or equity in your organization.
It’s important that you choose board members who bring experience and value to your organization. A board search firm can help match you to the right individuals, but these services can get costly - so try doing the research yourself. Your board might comprise trusted mentors, local community or business leaders, or former business colleagues. Begin by asking yourself what key roles are you currently lacking and would be most valuable to you moving forward? Is it in the area of finance, marketing, technology, management, etc.? Ask around. Where did other businesses find their directors? It’s also important to have a recruitment plan. This means being prepared to explain the responsibilities of the board and the time commitment involved.
In the early stages, it’s okay if your directors meet informally. Over time, you’ll notice the need for scheduled meetings, communication between meetings, and agendas in advance. As the board grows more formal, some of the early directors will step up to their responsibilities while others, for varying reasons, will drop out or remain in an advisory capacity.
Legal Considerations to Forming a Board
Forming a Corporate Board – If you are required to form a board, it’s always best to consult with an attorney who can advise you on the requirements of your articles of incorporation and corporate bylaws. However, here are just some of the basic requirements that boards need to comply with:
If you are incorporated as a Corporation or S Corporation, the law requires that you form a named board of directors and hold at least one annual meeting. Named titles vary according to the bylaws in the state in which you are incorporated but typically include a president, secretary, and treasurer. The board must also maintain either a written record of items and actions discussed at the meeting or a signed statement approving the outcome and actions.
If you are being funded by venture capital, the investors require you to form a board, on which they will take a seat. As president of the business you will assume the role of chairman of the board and CEO. The board is responsible for the CEO’s compensation and can fire and replace the CEO, as necessary. Board meetings tend to occur more frequently than with a Corporation since investors have a more direct hand in strategic decisions.
Forming an Informal or Advisory Board – Even if you set up and advisory board or informal board of directors, you should still consult a lawyer and have all members sign a non-disclosure agreement. You should also draft a charter that outlines the responsibilities and duties of the board
by L. Blake Harvey, founder and chairman of the board at Lawrence Blake Group Int'l.