How do you know when it’s time to add new members to your board?
Tony Schroeder, CEO of Choice One Engineering, says it really comes down to how much value a board member is providing you, the business owner. (Tony is also a Business Advisor at Aileron.)
“When I can predict what the board member is going to say, it’s time for them to move on,” says Tony in this video.
Tony does not use term limits with his outside board as a result. Instead, Tony asks: Are the board members still providing value to the company? And are we providing value for them? “[That’s] because with a board of advisors, they’re getting about as much out of you, as you’re getting out of them,” he says.
The Board Serves You, The Business Owner
“The fact is, a board of advisors serves at the pleasure of the owner ,” says Marty Densmore, a former Aileron Business Advisor. Marty has helped countless business owners create high-performing boards and he’s also a board member himself.
How to approach and use term limits, therefore, is in the hands of the business owner. “Board members can be terminated at any time, or may resign at their own volition—regardless of term limits in place,” says Marty.
Of all the considerations that go into designing and forming an outside board, the term of service is important only to the degree that it helps to frame expectations.
“There should be an understanding that board service is a significant time commitment. When a prospective board member is asked if they have the time and interest to serve, that’s the time to deal with the term expectation.” Terms are often handshake agreements between the business owner and board member. They describe intent, but are otherwise loose agreements. “ The length of the term should relate only to the degree that it is useful,” adds Marty.
Using Term Limits: What To Consider
Rob Moyer, CEO Rexarc International, Inc., has used term limits for his first three boards. Having new perspectives and new areas of expertise represented on the boards has been beneficial for the company.
“Up to this point, it has been valuable to have fresh board members that could come in with new skills, experience, wisdom, and accountability,” explains Rob.
Rob is now on his fourth outside board. Rob sees how, strategically, there will be greater consideration given to the idea of extending a term for an existing board member.
“We are nearing the end of our two-year term with a board member who has broad-based skills he still brings to the table,” explains Rob. In this scenario, a board member is still providing significant knowledge and wisdom to the company. The result: Rob plans to continue working with this board member after his term expires.
Is Your Board Advancing Your Business?
David Dunaway, President of Ramco Electric Motors, Inc., does not use term limits with his board. David says the company plans on reviewing board members annually, and if it’s mutually beneficial for those involved, board members will stay.
“My experience with the board has been great. The people on the board know the company, and they can help see if we’ve correctly identified what our key issues are,” he says.
For board members to stay on the board, owners should instinctually feel board members can be used as confidants, providing them with wisdom and constructive accountability. Business owners can begin to evaluate the value a board member is providing by considering factors that include the person’s ability to:
- Identify and focus on the make-or-breaks for the organization
- Partner with the business owner
- Take a holistic approach to offer new solutions
- Be a dynamic part of the group—and responsible to the group
- Be a trusted and respected source of experience, wisdom, and/or accountability
David explains there is a great deal of trust, honesty, and respect when working with his high-performing board, which validates not replacing his board members for the time being.
“The board is a group that can hold me accountable and provide me with feedback,” says David. “I really need that. When I leave a board meeting, I have a list of things that I need to do that are good for the company. If I don’t do them by the next board meeting, the fact that the board member could quit on me, helps me to get those things done,” he says.
Build Your High Performing Board
Looking to learn about creating a board? Or, are you simply looking to get more out of your current board? The High Performing Boards program at Aileron was created with you in mind.