Seven Excuses CEOs Cite for Not Creating a Board of Directors

board

by scott pickard

No company is too small to create a board of directors, and no company is too large and sophisticated that it cannot improve upon its board because directors have the potential to add significant value to management and the company in countless ways.

Here’s how:

  • Directors can give good advice insiders might not hear otherwise.
  • Directors can be frank in a way employees won’t or can’t.
  • Directors ask, “Why would you do that?”
  • Directors help management network into important strategic resources such as partners, talent, capital, and markets.
  • Directors bring new ideas.
  • Directors double-check management’s plans and make them accountable.
  • Directors check for compliance to ethics, laws, regulations, and just plain common sense and good judgment.
  • Directors bring experience – they’ve been there, done that, and there’s no sense reinventing the wheel because that consumes time and money; and, there’s no sense in making mistakes because that’s painful.
  • Directors pitch in and help during periods of rapid growth or crisis.

That said…excuses, excuses

There is no good argument (generally) against using a board of directors, yet owners and CEOs continue to cite the following excuses:

1. I don’t have enough time

There are certain high-leverage activities for CEOs and owners that they must put at the top of their priority list because even though these tasks do take valuable time to plan, prepare, and execute (e.g., financial audits; a strategic planning retreat; a performance review with a key employee; a board of directors meeting), these activities hold the potential to make a substantial positive impact for the business. Executing these high-leverage tasks as a business leader is simply something you have to do, so you make the time.

2. I can’t afford it

The cost and complexity of a board of directors scales to the size of the company. In a large or public company you can expect to attract sophisticated directors and they will expect a compensation package commensurate with company size and the commitment required.

But if you are a start-up company and only a few people are involved, you most likely won’t be attracting public company directors that expect big fees. But you can attract successful local people that were once in your shoes and know what it’s like to start and build a company and they’d be pleased to serve on your board as a way to give back – sometimes only for the price of a dinner and a few beers.

3. I don’t know anyone to ask

Many people say this initially but if they take a few minutes to reflect, they can always think of someone to invite to be a director. Also, they usually know someone who could be an intermediary to a director candidate. Good intermediaries can be a friend; a relative; a business colleague; your accountant, attorney, or banker; a professor; the Chamber of Commerce; a valued and trusted key supplier or client.

There are also organizations that foster better corporate governance and directorship that can match directors looking for board assignments with companies looking for good directors. For larger companies there are search firms that specialize in recruiting directors to large and public boards.

4. I don’t know what value they would bring – I know what to do

An executive with this kind of attitude most likely feels this way about many things, not just a board of directors. This kind of insulated, ivory-tower attitude only limits new opportunities for management and the company.

The objective evidence indicates that boards do provide real value to management and shareholders. However, it is true that boards also hold the potential to screw up royally and there are many examples of that from both for-profit and nonprofit boards, big to small. But that is not because the value proposition of a board is not valid, only that those particular boards were dysfunctional and acted irresponsibly. The overwhelming majority of boards do great work for their constituents.

5. I don’t want anybody to know what we’re doing

It’s a valid concern for many companies, but you cannot operate inside a top-security box forever. You need a few select trusted advisers that you can lean on and use as sounding boards so that your thinking and decision making does not become inbred and myopic. Directors can give you fresh and unbiased insights and they will respect and maintain the confidentiality of your plans and intellectual property.

6. I don’t know how to set up and manage a board

If you can create, manage, and grow a company, you can create and manage a board. Most attorneys are very helpful in making sure you cover the legal basics. Experienced directors themselves will be very helpful and patient as you proceed and learn on the job.

There’s a wealth of good books and training programs at your disposal. In essence, a board meeting is just like any other meeting where you set a prioritized agenda, meet, discuss, and get things done.

7. I don’t want any outsiders involved – this is a family business

It is a truism that there is family, and then there is everyone else. Experienced directors understand this as it relates to the dynamics of a family business board, and still you would be surprised how effective (and refreshing!) an outside director can be inside a tight-knit family business and board.

Family members are constrained in so many ways from being totally honest with each other. The outside director is unconstrained and sometimes the only one to tell it like it is. This can be an invaluable resource for a family business.

Just do it

If you’ve been dragging your feet to develop a board, just get on with it.

At the outset of building a board you will find that you can learn quickly with the help of the directors themselves. In a year’s time you will be the expert. You will find that your directors may refer you to other non-competitor CEOs who are looking for good board members. This is one of the primary ways the community of directors populate their ranks.

- sp -

capitalism + collaboration = collabitalism

Poor performance at the branch office

by scott pickard

Dear CEO:

I think an improved performance evaluation process will help this situation in general, but that does not happen overnight. It’s an employee cultural thing and takes day-to-day management, leadership, and training to instill.

Human Resources Performance Review Weekly peer-review assessments directly assist in the management of performance on a regular basis. in general: balanced scorecard | branch office: Poor performance at the branch office sp | classifications: job descriptions, salary ranges | compensation: base + variable | Key Performance Indicators KPI | long cycle (annually) | peer review | professional development: educational assistance, training (skills) | self-assessment & reporting | short cycle (weekly): FairSetup > Collaboration | transparency | verification: skills incentives: loyalty: 401(K) matching, stock options, vesting | performance: profit-sharing bonus pool Information Technology objective: Key Performance Indicators (KPI) subjective: sample performance standards  Employees generally detest the annual performance review.

Employees generally detest the annual performance review.

I’ve heard you say before that you’ve never really fired anybody, and that’s another leadership task that must happen from time to time, otherwise employees know there’s no real accountability for whatever they do. This may or may not be one of those moments.

The big issue I see is you just don’t seem to have anybody on site that is your equivalent who has the technical and leadership ability and also is incentivized by base salary, bonus, and possibly equity participation to really put the time and energy into keeping that office running tightly and successfully. Even though I know you work your butt off every day, almost all day, trying to do that yourself remotely and also traveling there quite a bit, it’s not the same as having that leader who shows up first every morning and leaves the office every night last. If I were a potential buyer of your business, this would be one of the most important things I would be looking at. Of course, buyers typically plan to put one of their own people into that slot, or they will conduct a search and hire that person.

Let me know how I can help.

- sp -

Evolution of the office

by scott pickard

Preparations are all already underway to celebrate the 40th anniversary of the introduction of the cubicle into the American office scene. The man called the father of the cubicle — Bob — was asked to characterize the legacy of his brainchild and he said, “It seemed like a good idea at the time.”

The week-long festivities which some are calling the “Super Bowl of Office Furniture” will be held in Toledo, Ohio, which has the largest concentration of Red Roof Inns in the nation. Events will include workshops on cube art, hospitality cubes, a tradeshow showing the latest cubicle designs with a sneak preview of the industry’s new experimental models. The week ends with a gala dinner /dance hosted by once-good-golfer David Duval.

Not everyone is happy with the cubicle, though, and the discontent has sparked a revolution among office thought leaders promoting fresh ideas, such as: (a) telecommuting, the “second office”; (b) sprawling out your papers and laptop and muffin with bits of cream cheese on your table while talking annoyingly loud on your cell phone in a Starbucks, the “third office”; and now (3) the “fourth office,” TBD.

The “fourth office”

Just what the hell is it?  It’s just out of our reach, but visionaries have theories as to how the “fourth” will manifest itself.

“I see it as an office of the mind,” explains Dart Maxn, head curator of miscellaneous things at Milan’s Museum of Heavy Industrial Objects. “No paper, no calendars, no nothing! You carry everything around in your head. If it’s important you will remember it; if not, then you won’t remember it. It’s nature’s perfect system of prioritization.”

“For instance, if you miss an important meeting with your most important client, then you won’t get the sale. So in the fourth, companies will have smaller revenues but there will be no need for wastebaskets.”

One radical idea has been developed by Jason Calpt, parking lot security guard at a Fortune 500 Corporation, in charge of fixing the lift-gates when they break.

“It dawned on me one day that all those cars in the corporate parking lot were sitting empty all day and then whammo, it came to me: every car in the lot is an office!  Think about it. You’ve got space, privacy, HVAC, tunes, and adjustable leather seats.”

in general: boxoffice460 | capital planning/asset management system: www.vfa.com | CCTV: Agility Video | search: www.globalofficesearch.biz, regus | shared facilities: wework | virtual office: www.intelligentoffice.com | working at Google: www.youtube.com/watch?v=aOZhbOhEunY facilities management: How often does the company evaluate the cost-effectiveness of its branch office(s)? | automated Irrigation: www.hydropoint.com | on-demand asset lifecycle management: www.axispointe.com | quantified office: Robin used: heavy equipment: www.ironplanet.com questions for landlord: How long have you been renting to the company?  How many square feet does the company rent from you?  Does the company make its rent payments on time?  Have you ever had to contact the company to get your payment?  Does the company maintain the property in good condition?  Would you rent to the company again? books: Corporate Interiors Yee | The Other Office: Creative Workplace Design Stewart

Make a statement where you work by being that person always first to arrive and last to leave the office.

Tickets to the 40th anniversary of the cubicle will be available soon.

sp

RadioShack files for bankruptcy

Development of Technology Innovation  RadioShack files for bankruptcy. Garages are the authentic American fablab. sp | Will Uber’s autonomous cars destroy millions of jobs? Is innovation predictable? Does every innovation begin with a question? What can pirates, terrorists, computer hackers and inner city gangs tell us about the misfit economy?  Where do big ideas come from? Does public scrutiny and high expectations of stock value impede corporate innovation?  Do your innovation teams have a blend of cognitive types? (a) creative’s; (b) detail-oriented; (c) conformists Who is the greatest innovator of the past decade?  How is innovation management handled across the enterprise?  What internal and external resources are used to stimulate and guide innovation?  What percentage of revenues is from new products introduced in the last two years?  Is innovation blocked or stagnated in the company?  Why? (a) too many layers of approval required; (b) bad decisions due to lack of info flow up through the organization; (c) unsynchronized incentive systems; (d) slow response time to customers and market; (e) "not invented here" syndrome; (f) "always done it this way" syndrome; (g) creativity and innovation are driven underground; (h) overall frustration and dissatisfaction; (i) customers are angry and alienated  How fast can a new idea be tried out at the company? Months? Weeks? Days? Hours?  Does the company's new product satisfy the requirements for rapid diffusion into the marketplace? (a) Simple; (b) Compatible; (c) Observable; (d) Trialable  Do we focus our creative efforts toward the creation of value for others?  Do we consistently see opportunity in the face of adversity?  Do we cultivate collaboration through diversity in our social and professional networks?  Do we make the most of our programs for learning and training?  Do we cultivate a healthy work/family balance?  Do we work on becoming good presenters?  Do we have a good understanding of our core competencies and how to focus them on opportunities in the marketplace?  Do we periodically challenge long-held assumptions (assumption busting) to open up possibilities for novel solutions that are rooted in a fundamentally different understanding of the problem? in general: Create a path that makes it easy for good people to do good things, and they will do it. | www.ninesigma.com | digital literacy | conferences: innovation.economist | commercialization: copycats | corporate sponsorship: Shell’s GameChanger | crowd-sourced: openIDEO | design: catapultdesign | digital brainstorming: branddelphi | energy: ARPA-E Energy Innovation Summit | enterprise social innovation: 3ds | federal sponsors: NSF I-Corps | follow the patents | quid | games: disruptus | global innovation index: www.managementtoday.co.uk/news/610009 | government impact: Permissionless Innovation Thierer | incentivization | innovation ecosystem | marketplace: planeteureka | museums: nobelmuseum | on-demand management: acceptsoftware, brightidea | resources: strategos, centricsoftware, ninesigma | product lifecycle management: www.centricsoftware.com, rymatech, www.acceptsoftware.com | states: illinoisinnovation | students: Design for America, hackathon | team building: www.celemi.com | timeline: stages of evolution | ultra high-speed networks: gig-u | young innovators: Disney's Big Hero 6 - XPRIZE Challenge academic research: Research Excellence Framework REF breakthroughs: FAST’s top 50, popular science top 100, Wharton’s 30 over 30 disruption > obsolescence: What added value does your retail outlet offer the customer today vs buying real-time/online? | A Total Disruption | Blackberry | creative destruction: ice > refrigerator | devices: sliderule | education: imagine K12 | gigaomnetwork | publishing: The Great Amazon Debate salon | retail: RadioShack bankruptcy | taxis: Uber |  top 10 | trends: techie xprize: Revolution through Competition | exponential innovation: overview |  xprize.org big ideas | tricorder books, articles, essays, portals: Abundance Diamandis | Closing the Innovation Gap Estrin | Creating Innovators | Epistemology of Innovation Vojak | fastcoexist | Open Innovation Chesbrough | Reverse Innovation Govindarajan | Ten Steps for Innovators Houtman | The 50 Greatest Breakthroughs Since the Wheel Fallows | The Innovator's Dilemma Christensen | The Medici Effect Johansson | The Power of Two Shenk Retail | Jobs | Entrepreneurship

What added value does your retail outlet offer the customer today vs buying real-time/online?

 

Finding a neutral party to facilitate a merger of two businesses

by scott pickard

I wanted to run something by you, which may or may not be something you want to do or you may not have the time. But I thought of you immediately and think that you are well suited to this task.

I have a very good long-term friend who recently asked for my help to identify someone who could facilitate a negotiation between my friend and another owner with the goal of merging their two respective businesses. They have in effect reached a “gentleman’s agreement” to merge the businesses after having teamed together on some research proposals for the last two years and been very successful doing so. They’ve been talking about this for the last two years. Now they just need a neutral facilitator who can help them close in on the best plan and legal framework for merging the two businesses into one, and that’s where you would come in.

facilitate

I can give you a few specifics:

  • These two businesses are both involved in highway pavement engineering and research.
  • One is located in Portland Oregon; and the other is located in Tampa Florida.
  • The two companies are of the same approximate size, each generating $800K – $1M per year in revenues and they are both profitable.
  • The two owners feel that the companies complement each other perfectly.
  • Both the owners and staffs are compatible and have already worked together.
  • The two owners are certainly prepared to pay the going rate for professional services of this kind.
  • I don’t think they are looking for any further capitalization, but I do know that they want to grow the merged business.

These two Owner/CEOs are looking for a trusted third-party to help them talk through the process and reach a consensus on the best way to merge their two companies from several perspectives: legal, operational, strategic, and financial/tax.

If you are willing to consider this, I would like to suggest your name because I believe you have the integrity, personality, insight, and overall business background to help them pull these pieces together and agree on a plan of action so that they can go to their respective attorneys and say, “Here’s what we want to do, draft an agreement that we can sign so we can get started.”

So, what do you think? I’ll give you a call and see if this is something you’d like to take on.

sp

Board Governance: Champaign Public Library

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Champaign Public Library

Scott Pickard joined the library board in October 2013.

Describe the importance of public libraries.
I often run past the UIUC underground library, and one day I stopped to read the words inscribed on the stone wall: “Let this be a holy place for the human spirit consecrated to the forces which magnify the soul,” and, “Books are alive to the man who knows how to use these sources of inspiration and power.” The clarity and truth in these quotes has made a lasting impression on me and emphasizes so well the importance of libraries.

Describe your background and what you bring to the board.
My background is a combination of engineering, entrepreneurship, and writing/editing. I have served on many for-profit and non-profit boards, so good governance is a special interest of mine. My family has lived in the same house for 30 years only blocks from the CPL, so this library has played a special role with our family and my kids growing up.

Tell us a little bit about your family, pets, etc.
My wife Karen and I have been married 42 years. We have three children and three granddaughters. I’m an avid runner, tennis player, golfer, traveler, reader, writer, and tinkerer.

What have you read, watched, or listened to lately?
Read: Thinking Fast and Slow by Daniel Kahneman. Watched: The Golden Globes, mostly to see and hear the comedy genius of Tina Fey and Amy Poehler. I listen to NPR just about all day, every day.