By Nick Sturge

I spoke to a business owner recently, who had built the business successfully from scratch. But she was stuck – and beginning to get tired of doing the same old thing. I asked her how effective her board was. “Well, that’ll be me then”, she said.

I suggested she look for a non-executive director to share the load and help move the business forward – and reinvigorate her.

“But I don’t know anyone who knows this business as well as I do,” was the response. Unfortunately, that is a common misunderstanding of the role of the board.

When someone starts a company they are usually four things at once: the director, the owner (shareholder), the manager and the worker. They do everything: setting the plan, talking to customers, building the product, making the tea, banking the cheques and spending the profits.

As the company grows, you will probably get people in to do more of the work and manage the different parts of the business for you.

While this may be difficult when you are just the one person, it is important to understand how you think differently, and the different things you should be doing, in those different roles.

This can be difficult to get right, so it’s worth thinking about the key tasks of the board:

• establish and maintain the vision, mission and values (the aspirations of the business, how it is going to do it and the principles by which it operates);
• decide the strategy and structure;
• delegate to management and monitor the implementation of policies, strategies and business plans;
• account to shareholders and be responsible to stakeholders.

If you are managing the day-to-day of the business it is difficult to think strategically and plan for the best long-term future of the business. You need to switch hats – set time aside to think as a director, and as a board; and separate the strategy from the tactics.

When I co-founded a company, we hired an experienced non-exec chairman very early on. We hadn’t run a company before and did not understand the difference between manager and director. We were all “techies” and dress code was jeans and T-shirts. Our chairman ran monthly board meetings in addition to our regular management meetings.

With the same bunch of people at each meeting, what was the difference? To help us understand this, he insisted we wore shirts and ties to board meetings – to make sure we were in a different frame of mind and that we appreciated the importance for the board meetings. Somewhat ‘old-school’ perhaps, but it was useful. The other difference, of course, was the agenda and less detail at the board meetings.

Going back to the business owner I mentioned earlier: she was not separating the difference between manager and director. She is an expert in what she does, she does not need someone to show her how to build and sell her products. But thinking strategically is rarely a solitary activity. If she were to appoint one or two non-executive directors (with one as chairman) she would have a new, higher level of thinking in a structure that will add to the value of the business.

Good – and well chosen – non-execs should bring fresh thinking, different experiences, peer support, objective and critical analysis of the issues: a new lease of life for the business.

This business is successful but as the shareholder, how is she going to get the value out of the business for her retirement?

Succession planning (preparing and planning for someone to take over the running of the business, or at least preparing for the departure of the founder) is essential to maximise the ongoing success of the business and hence the value for the shareholders.

If you remain THE shareholder, THE director and THE manager it will be impossible for the business to survive if you retire or become ill. You owe it to your shareholder (you and your estate) and to your other stakeholders (your employees, customers, suppliers etc.) to make sure the business is sustainable.

At the end of the day, it’s all about the people.

Nick Sturge is the Chairman of the Bristol branch of The Institute of Directors and Centre Director of SETsquared Business Acceleration at The University of Bristol

Further reading

• Institute of Directors: http://www.iod.com