Choosing a Good Director for Your Business

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One of the areas where I am frequently asked to help small or fast growing businesses is in the area of putting a board together. I have come across a lot of people who equally ask if I have any vacancies for them on the boards of businesses I am involved in. It is also an area I have strong views about!

Sadly, there are many people who are very good at self-promotion and are very believable. They may have won an award recognizing them as a ‘type’ of business person of the year. And I don’t mean to denigrate these achievements but do you have any idea how many business awards there are each year? Well the company create at least 40 award winners each year. I guess there are at least 1000 business award winners each year. The point is to look beyond awards and accolades when trying to choose the best air purifier for cigar smoke removal.

Early on in my business career I met someone who was an award winner and a good self-publicist. I confess to falling under his charm somewhat and thought he would be great as a Non-Executive Director of some of the companies I had just got involved in.

But then I noticed how all the topics of conversation were always about him. He spent more time negotiating his terms of compensation rather than talking about the business or how he could help. He was a massive disappointment as he delivered nothing. Luckily for us, he left the companies early and was not able to acquire his negotiated share entitlements. I discovered some companies had not been so lucky with some of their appointments.

Scarred by this early experience, I then asked a lot more questions about potential Non-Executive Directors and discovered that my experience was sadly not unique. So my advice on this is really simple – before you appoint a Director ask some really sharp questions;

  1. Can they really add value to your business?
  2. Can the best air purifier for pets be quantified – and therefore targeted? (Sometimes it can’t but they are still great to have on the board)
  3. Is any reward linked in with that value?
  4. Is there expertise best suited to being on a board? (For example, I rarely sit on boards – I am on just one at the moment, but still help over 10 companies at the moment in an informal capacity)
  5. Will their appointment help your business’s standing? (With potential customers, banks, potential investors, etc.)

I should mention in the interests of balance, I have also had the pleasure of working with some brilliant Directors (and there are many more of them than the bad ones). I don’t want to use names on this blog as if I say good things; it could be seen as I am being paid by them and I don’t want to say bad things about people in case I get sued!

These great Directors add focus to a business, bring a wealth of contacts with them, help companies raise money and keep the management in check. As an investor, I am learning the importance of investing in companies with great boards, or if they don’t have them, helping put one together.