“Sometimes this experience brings some caution to our decision-making. But equally, sometimes our non-executive directors bring great confidence to the board to make the bold decisions that are required to be made. We have monthly board meetings that give the CEO and executive team real drive and focus to make decisions, knowing that such decisions have the backing of a professional board.”
Valmont Interiors founder Sergio Pires says that having a chairman, an outsider, coming in once a month for management meetings has been invaluable.
“It has been fantastic to discuss company strategy and vision with someone who gives great advice from an outside perspective,” Pires says.
“He has really mentored us through our expansion and continues to offer sound advice with recruitment strategies and internal management strategies.”
Pagonis says picking the right outsider is important. “You can’t just grab one of your mates,” Pagonis says.
“Most are looking for two or three independents, depending on how big the SME is. The big decision is picking the right independent.”
“When you are picking a board member, you have to have someone who is experienced commercially and who understands governance and is also good from a network perspective. You are looking for people with commercial nous, who have the strategy, the big picture and are proactive.”
Pagonis says having a strong and independent chairman is also critical.
“Sometimes when you have two or three partners on the board, everyone has a different view and you need someone who can control the board meetings and make sure you don’t go off on a tangent.”
“A good board meeting would be three to four hours max and the chairperson controls that whole process. Normally, that would be someone who is independent. That works best.”
Picking the right person, he says, is a skill. It means not only selecting a person with skills. They need to be able to work with others and they need to know how to manage ego and conflict.
He says entrepreneurs should interview candidates, preferably with a lawyer on hand to monitor the conversation and provide their assessment.
“If you pick the wrong person, it’s not going to work because they will be fighting all day and within months, the board member will go,” Pagonis says.
Where do you find them? Pagonis says they can be selected from the Australian Institute of Company Directors or by talking to other businesses that have set up boards.
But key issues need to be sorted out first. With family businesses, for example, family dynamics and issues need to be worked through.
“You have to understand the family as well as the emotions, the conflicts, the behaviors and issues that are in the family,” he says.
“I always interview the family and find out what the real issues are. The pitfall is if you don’t understand the family dynamics, that’s where nine times out of 10 the board does not succeed.”
Similarly where there is more than one shareholder in the SME, the issues covered in the shareholder agreement need to be addressed.
For some entrepreneurs, setting up a board is too expensive and time consuming. They also don’t want to give up control. Macek says: “If they do cling to control, that often comes at the expense of the entity not fulfilling its real potential. And for some people that’s fine, if that’s what they want.”
Some of the Fast50 say they do not have a board, but they plan to have one in the future. Even if it costs time and money and means some loss of control, they would see it as something that works in everyone’s interests.
After all, strong companies need strong boards.
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