Failure to build an effective board can be a recipe for trouble before the business ever takes off.
What are the biggest mistakes made when forming a Board of Directors and choosing people to be members of the Board of Directors? originally appeared on Quora – the place to gain and share knowledge, empowering people to learn from others and better understand the world.
Answer by Shefaly Yogendra, Board Director Experienced with For- & Non-profit, Private & Listed Boards, on Quora:
It would be tricky to claim these are the biggest mistakes, but the following are significant mistakes in forming a board of directors.
- Not understanding the skills required on the board (whether due to ignorance or driven by malice)
- Consequent focus on the star quality rather than the active contribution of the board directors
The early board of now-troubled startup Theranos, which assembled “three former cabinet secretaries, two former senators, and retired military brass” is a prime example of both these phenomena in action. None of the board directors seem to have understood the company or its technology, nor does the founder seem to have encountered much challenge or oversight.
- Giving away a board seat under pressure or out of fear to someone utterly unsuitable or unwilling to do the necessary work
I have recently advised a non-profit-in-formation on how to build their board. Their celebrity co-founder is unwilling to relinquish creative control and does not seem to understand that being either CEO or the Board Chair will require a lot of work and active involvement, something she is unable or unwilling to put in. Needless to say this is a situation where trouble is brewing even before things have taken off. The two co-founders will do well to have a clear conversation now about expectations and scope of engagement, to avoid problems later.
- Choosing board directors to be passive push-overs or to rubber-stamp the founder’s decisions or otherwise not push good governance standards
This is a regrettably common dream of founders or dominant shareholder led companies, and has gained some recent encouragement from one of the world’s highest paid CEOs. Theranos and Satyam, a corporate governance fiasco of sizeable proportions, both showcase this error.
- Not looking beyond one’s immediate network/ not casting one’s net wide enough
This is a common occurrence especially among young founders. Possibly due to a mix of reticence and actually not thinking creatively about asking. To them I say that if you cannot hustle to get people on side for your idea, you may have a slim chance succeeding at the hustle needed to build that idea into a flourishing business.
This question originally appeared on Quora – the place to gain and share knowledge, empowering people to learn from others and better understand the world. You can follow Quora on Twitter, Facebook, and Google+. More questions:
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