Originally published: 08.01.08 by Greg McAfee
Forming a board of directors is crucial for hvacr businesses.
In the 1988 movie, “Tucker: The Man And His Dream,” Jeff Bridges plays the part of the great entrepreneur, Preston Tucker. He is required to hire a Board of Directors with prestigious names to allow his company, The Tucker Corporation, to excel and go public. Robert Bennington chaired this Board of Directors and ended up taking over the company. He then vetoed every great idea that Tucker came up with. This board, with the help of congress, put Tucker right out of business.
For many small-business owners, the above scenario is what comes to mind when anyone mentions a Board of Directors. Let me assure you, this is not what I am speaking of when I suggest forming a board for your hvacr company.
There are four different types of advisors: Board of Directors; Mentors/Business Advisors/M.I.X Groups; Family Council; and Board of Advisors.
Some of you may be thinking: I have good people and I don’t need help; I don’t need outsiders telling me what to do; boards are for bigger companies; I can’t afford them; no one would want to be a board member in my company; we already have board members — employees, family and an attorney or banker; or finally, I am active in an association group already. Well, I thought the same way at one time, but if you want your business to really accelerate you may want to reconsider. Will Rogers quipped, “Even if you are on the right track, you’ll get run over if you just sit there.”
What are you weak at? Is it finances, marketing, team building, human resources, strategic planning or operations? Recruiting a board of advisors requires careful thought. The company should select different advisors for different reasons. Some advisors may be recruited to provide added credibility. Well-known leaders in your area can be especially helpful. The outside board members that you seek should offset your weaknesses. My Board of Advisors consists of three very skilled and successful business people. One is a successful owner and great national leader in the landscaping industry; another is a human resources expert who assisted in most of the hiring for the Iams Co.; and the third is a former owner of a manufacturing company whose specialty is developing the core operations of a company.
As I mentioned earlier, I have some great mentors in the hvacr industry, but gathering wisdom from these mentors is normally on an as-needed basis and mostly pertains to the hvacr industry. Although I value and respect my mentors, I prefer not to do everything they do. My board brings new and fresh ideas that work for my company.
Although my relationship is very good with my vendors, banker, attorney, and my accountant, it is not recommended to have advisors who are on your payroll on your board. Why? Because a potential board member should have no desire to promote or generate income for their firms, but rather to help your company perform at a higher level. However, your vendors, bankers, attorneys and accountants can be good resources to identify prospects for your board. As you are reading this, you may be thinking right now of someone you’d love to have on your board. Consider up-to-date retired executives, college business professors or senior executives in other companies that have a proven track record of being the best.
Forming and operating a Board of Advisors is not as complicated as it seems. It does not require any voting and uses an informal structure. More than likely, your board members either sit on other boards or have one of their own so they may be able to guide you through the process. Since trust building and confidentiality is so important, having an attorney put together a onepage letter of indemnification and a hold-harmless agreement is a low-cost investment.
When you’ve located a candidate for your board, take the time to interview them. Take them out to lunch a few times and make sure they fit and ask for references before making a final decision. Your first board member can help you locate the other members and may want to interview them with you. You want people who are independent thinkers and are not afraid to challenge you— in other words, you don’t want a rubber “yes” stamp. Define your working relationship and what you expect from them as well as asking them what they expect from you. Good communication throughout this entire process is the key to making it work.
Now what will you pay these professional people? Well, if they ask during your interview process about pay or salary, exclude them from your list. The pay is just a by-product of helping you, most board members do not need the money, but they do enjoy assisting you. Typically, $400 to $700 per board member per meeting is the norm. That is less than $3,000 per year to tap into resources we are not able to produce on our own.
On average, a board meets four times a year for about four hours. It’s a good idea to give them dates, times and locations one year in advance so everyone can plan on attending these meetings. It’s also a good idea to bring their checks with you to the meeting and pay them right afterwards. These four meetings a year should not be the only time you meet with your board. Opportunities or challenges may arise and you will need to have a quick lunch meeting with all or some of your board to discuss and share ideas or concerns. A quick phone call or e-mail will take place from time to time as well.
Remember, the job of a board is to be a resource to the owner/CEO and the business. They will ask questions and make recommendations. My first McAfee board meeting was approximately four hours of sharing and allowing them to get to know my company and me. From a short history lesson, to the present situation, to where we want to be in 10 years, I loaded them up with information and they asked me a lot of questions. They began to feel my passions and heart beat for my business. They have the need to know all details, no holds barred. You will need to share your financials, goals, vision, strategy and any other information concerning your business. With that in mind, the most important question that you have to ask yourself is: Am I willing to listen and act on sound advice? If you are not good at taking advice and wanting to improve, then this “board” idea may not be for you, but don’t think you have to do everything your advisory board recommends. It’s your business and you should always make the final decisions. However, I can’t reiterate this enough, it’s to your benefit to be very openminded and trust your board’s instincts and wisdom in certain areas.
Clay Mathile, former CEO of The Iams Co. in Vandalia, Ohio, sold Iams (a private company) to Cincinnati-based Procter and Gamble Co. in 1999 for $2.3 billion. When Clay had revenue up around the $200 million mark, his board told him it was time to bring in someone else to run the operations of the company. Needless to say, this idea did not sit well with Clay. According to Clay, it took him almost a year to consider the idea, and then a few years to actually find the right person for the job. But in 1990, Tom MacLeod, former president of the bakery division of Sara Lee, became Iams new president. No entrepreneur (we are first entrepreneurs and then contractors) wants to hear that we need to change or that someone else could do better in our own business. Clay will tell you that he didn’t either, but they worked well together as Clay remained the CEO and visionary while Tom filled the president’s position. Together, they took the company from $200 million in sales to over $1 billion.
Whether your company is very small or very large, the benefits of having a board will get you to the next level and beyond. You still own the agenda; the strategy and continue to lead your company to greatness while your board uses their skills and experience to assist you by adding new skills, unfiltered insight, and new ideas. If you want to make future progress, then a Board of Advisors is for you and if you cannot afford to hire the talent, rent it, by recruiting the best available Board of Advisors. Recalling the words of the great Charles Kettering, “There exist limitless opportunities in every industry. Where there is an open mind, there will always be a frontier.”
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