Which Type of Company Board Do You Have?
In looking at a variety of company’s boards for analysis there seems to be four distinct types with multiple variations.
The first one is “The Turnaround.” This is a company who is really struggling and is in a state of pivoting. Often times new capital comes into the company and as a condition to get the capital a board must be formed. New investors want experienced board members to be the overseers of management to help them get going in the right direction while ensuring that appropriate actions are taken to preserve the investments made. This board position is much like being a doctor in an emergency room at the hospital. Number one goal is to stablize the patient and stop the bleeding before any healing can take place. When this board is started the first 2 or 3 meetings go ok and the board is looking for data on the real state of the business and looking for patterns. The critical time is around meeting 3 or 4 when tough decisions need to be made around strategy and people.
The second type of company is the “Go-Go” company. This organization is having steady and/or hyper growth. This board is focused on keeping up with regular updates between board meetings and multiple committees to make sure that the governance is not falling behind. Often it is difficult to really know if the company is making progress in all the right areas and in keeping up with the growth. Strategic decisions become challenging as to make sure that key initiatives are not being underfunded or overfunded to the current and projected growth.
The third type of company is the “Steady As You Go” company. This feels nice to serve on this board even though it may not be as exciting or stimulating as the previous two. The primary focus on this board is to manage risk in the shadow of complacency. Board members with long track records of being in business and who have seen multiple up and down cycles help with that balance.
The last company is the “CEO” company. The CEO (who may also be Chairman) is in total control of both the company and the board. In a “CEO” company the board is secondary and most likely has a very close and possibly a personal relationship with the CEO. The board members are there to rubber stamp strategy and initiatives. This does not mean that this is a bad company, it means as long as the CEO has the touch and is fully engaged then the company will perform fairly predictably. Sooner or later something will change and the board may or may not be ready to act appropriately.
Each different company needs different types of board members to serve their organization so knowing what is needed makes a big difference on how well the company board functions. You don’t want a high growth sales executive to join the board of a Steady As You Go board because nobody will be happy.
If you are not sure which type of board your company is Cardinal Board Services can provide a board analysis to help. For this or other board related services call or click here and we will contact you shortly.