Should we already know the people who will sit on our board?

This article first appeared August 29, 2011.

If you are starting out, you should definitely approach potential board members that you already know.

There are many reasons for this:

1. Relationship: If they know and like you, this may be enough for them to join your board. People are primarily attracted to individuals that they like.

   Business is no different. If you don’t know them already, it may take some time to build a relationship before asking them to become a board member.
    

2. Background: You know them already, their background, track record and so on. This way you know if they are suitable for your business.

   Many people exaggerate or overstate their skills and experience on their CVs when applying for board positions. And it takes time to do background and reference checks. By starting with someone you know, you are already comfortable with their proven track record.
    

3. Easier to do a non-cash deal: It’s definitely to structure a non-cash deal with someone you know. In one of my previous articles, I mentioned different strategies for attaining board members that don’t require cash (equity, contras, etc).

   If they know you, it’s far easier to structure these deals because of the existing relationship.
    

4. Better access: It’s no point having a board member that you don’t have access too. This is a common problem. You need to be able to meet with them each month and call or email them on a regular basis for advice and guidance.

   If you don’t previously know them, you don’t know how accessible they are. I’ve met plenty of people who have the experience, but are not accessible because they are too busy, travelling, on several other boards, etc.
   
   

5. Honesty: It’s vitally important that a board member is honest with you. They need to be able to give you their honest opinion and not pull any punches.

   If they don’t know you very well, there is a chance that they might just tell you things that you want to hear so as not to upset you. Board members shouldn’t fear about expressing their opinions.

Some other tips for start-ups:

• Start with one: If you have never built a board before, just start with one for six months. See how they go and build experience working with a board member. After that you can bring on other members.

• Rotate your board members: As a business grows and evolves, so should the board. So agree upfront to review the board positions every 12 months. That way if you need to replace a board member, they won’t get offended.

As the business gets bigger, you can of course bring in board members that you don’t previously know.

ASX public companies often have eight or more board members and they rotate them regularly.

But if you are small, best to stick with people that you know.