Is Industry/Technology Expertise a Board of Directors Requirement? - By Rick Williams
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Is Industry/Technology Expertise a Board of Directors Requirement?
I often see postings for a board of directors member requiring deep knowledge of the company’s business and/or technology. If that expertise is required on the board, what contributions are the company’s CEO and leadership making?
Too often, a company owner or CEO puts his or her golf buddies on the board or sees the board as an inexpensive consultant.
My friend Larry Siff hosts a CEO forum called The C Level Community. Leaders across many industries hear from top CEOs and experts. Larry brings me in as an “Expert” for the online Community Forum to answer questions about making difficult decisions and how to create a value-add board of directors. I get great questions! Here is one about boards of directors and my answer.
Seattlenow: How important is it that the board member truly understands the business and technology of the company, or is it not relevant as long as the management understands it?
My answer: From my experience serving as a board member and board chair for companies across different industries, including tech and non-tech, most issues boards must address do not depend on deep industry expertise. Getting clear about goals/expectations, setting a risk/reward balance, understanding options, reviewing and approving major initiatives, and asking tough questions are universal.
A value-add board member must invest time to understand the company, its business model, and its competitive environment. The CEO must invest time educating board members on the company and the most important issues facing the company and its leadership.
The CEO who brings on board members simply because they are experts in the business or technology does not understand the role of the board or its value potential. If the CEO and senior leadership do not have more expertise in the technology and business sector than I do, I will not invest my time in that company.
The personal and professional qualities of board members with different backgrounds and viewpoints are far more valuable than their “expertise” when they join the board. Bringing the CEO or a senior leader of a company in a similar business sector on the board can be helpful because she can draw on her experiences in that role and help the CEO more confidently deal with similar challenges. The CEO board member is adding value because he has dealt with the types of challenges your company faces and not because he is an “industry expert.”
Early growth company leaders are sharply focused on fundraising and put investors and investor connectors on their board. I encourage these leaders to recruit board members who offer more than just their dollars.
A board member who has helped a company in similar circumstances — buying, selling, growing, reinventing itself, transitioning to new leadership, re-capitalizing, etc. will be a valuable board member. The board member who understands relevant customer or financial dynamics and will draw on that experience to ask challenging questions and help set expectations is a valuable contributor. A board member’s network of contacts is also a valuable contribution to the company.
An Additional Comment: Boards of directors are an undervalued and underused asset for most companies. I believe your board can be a value accelerator for your company. If you are a major shareholder or company owner, put people on the board who will help the company and the company’s leaders be more successful. If you are CEO of the company, invest your time recruiting board members who will help the company be more successful and help you be more successful in your job as CEO. Make your board into a valuable asset rather than another challenge to be managed.
Hot Peppers
When I think of agriculture and farming, my Northeast US roots bring to mind corn, squash, potatoes, tomatoes, and pumpkins – OK: dairy cows and trees. When I move beyond what is comfortable and familiar and experience other places and other lives, I understand myself better. When visiting Oklahoma, I was amazed by waves of wheat blowing in the wind from where I stood to the horizon. These hot peppers in Santa Fe caught my eye as a representation of that region’s dramatic color profile.
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