Entrepreneurial Boards: How to Recruit & Retain a Strong Entrepreneurial Board of Directors - www.gather.com - Dora Vell

July 21, 2008 01:21 PM EDT





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Often, chief executives and HR professionals have questions on how to
recruit and motivate new board members. They are unsure of the
appropriate: intervals for board meetings, compensation, and diversity
of the board's members. And, there is little research to help companies
develop best practices for attracting, retaining, rewarding and drawing
value from their entrepreneurial boards.


As a way to cogently and concisely answer these questions, the Vell
Entrepreneurial Boards Composition Survey identifies trends in boards
of directors. We surveyed 150 CEOs, venture capitalists and vice
presidents of human resources and board directors from various
industries.

We drilled down into our data to expose
differentials based on size, ownership structure, length of time in
business and revenues. By comparing findings to other surveys, and by
comparing private and public companies where possible, we were able to
highlight board practices at entrepreneurial firms, especially small
technology companies. We also discovered a diversity of remuneration
structures worth noting.

The following offers key findings
from the Vell Entrepreneurial Boards Composition Survey, and
recommendations for building your entrepreneurial board.

Tips to Help You Build a First Class Entrepreneurial Board

1. Watch Your Entrepreneurial Board Composition


The median proportion of independent directors is 20% at private
companies. That number skyrockets to nearly 70% at public companies.
Your company strategy needs to determine your board composition. Ensure
that the skill sets on your board match your company's strategy. They
should also complement the skill sets on your management team a well.
Maintain a diversity of skill sets and industry experience on your
board to offers you a well-rounded perspective on the opportunities and
challenges your company faces.

Aim high. Define your ideal
board candidate. Go after world-class talent. You will be very
pleasantly surprised with the caliber you can attract, if your business
model is solid.

2. Understand that Board Member Experience Matters


The median director in the survey's sample of small technology firms
reported a 3-year tenure, as compared to six years in an S&P 500
company. The median director has at least $100 million in liquidation
experience. When recruiting board members, you want to pay close
attention to the candidate's overall industry experience and
credentials. Try to recruit executives that can provide guidance as
your company grows and can add value beyond the three-year time frame.
As long as there is alignment between your board skills and company
strategy, why not aim for the 6-year tenure?

3. Seek to Grow Your Entrepreneurial Board Size to About 6 to 8 Members


In our survey, the average board represented six members. The median
number of directors within our survey ranges from five to seven,
depending on the size of the organization. Our sample ranged from one
board member to 28. When growing your entrepreneurial board, remember
too many members can breed confusion. Too few can leave important
perspectives buried.

4. Fill Empty Entrepreneurial Board Vacancies Quickly


Roughly 1 in 3 private companies have at least one empty seat on the
board. This represents twice as many vacancies as in public companies.
Empty board seats devalue overall production of the board. This will
rob your company of the opportunity to draw from the wealth of
experience that seat could offer.

5. Get Your Board Involved


The median number of meetings among respondent firms was six to seven
teleconference meetings per year with four face-to-face meetings.
However, Directors boards, especially in fast-paced industries, such as
software and telecommunications, should hold board meetings more
frequently. The speed of execution, the smaller management team and the
strategic importance of each decision dictate a more hands on approach
at the board level.

6. Compensate Board Members with Equity Upside


Private companies are much more likely than public companies to either
not pay their directors, or rely exclusively on equity awards, such as
annual awards or awards upon appointment. Only 27% of our survey
respondents pay a board meeting fee.

In 44% of private
companies, board members receive equity awards only upon joining the
board. Only 4% of public companies employ the same policy. There are
also equity retainers in some companies.

If you want to
attract and retain the interest of top-level executives for your
entrepreneurial board, then make equity compensation a priority. Only
50% of our survey respondents offer stock options/RSUs or some other
type of equity compensation.

7. Determine Your Annual Cash Retainers


There is a strong association between a company's revenues and the
dollar figure of the annual cash retainers they pay to board directors.
Keep in mind that experienced board directors will often agree to serve
for stock options rather than large cash-based compensation packages.

Follow this information and you will recruit and retain a strong, first class entrepreneurial board to grow your organization.


Dora Vell, an internationally recognized expert in executive search for
board members, CEOs, "C" level executives, Vice Presidents and board
members builds world class management teams for start-up organizations
through Fortune 50 firms. Now, you can get FULL ACCESS to her FREE Vell
Entrepreneurial Boards Composition Survey offering an updated
perspective with new angles relevant for your entrepreneurial business
climate. Get it now at http://www.vell.com