Business Angel Blog

Take caution when appointing board members

One of the areas where I am frequently asked to help small or fast growing businesses is in the area of putting a board together. I have come across a lot of people who equally ask if I have any vacancies for them on the boards of businesses I am involved in. It is also an area I have strong views about!

Sadly, there are many people who are very good at self-promotion and are very believable. They may have won an award recognising them as a ‘type’ of [tag]business person of the year[/tag]. And I don’t mean to denigrate these achievements but do you have any idea how many business awards there are each year? Well Ernst & Young (I used to work for them) create at least 40 award winners each year. I guess there are at least 1000 business award winners each year. The point is to look beyond awards and accolades.

Early on in my business career I met someone who was an award winner and a good self-publicist. I confess to falling under his charm somewhat and thought he would be great as a Non-Executive Director of some of the companies I had just got involved in.

But then I noticed how all the topics of conversation were always about him. He spent more time negotiating his terms of compensation rather than talking about the business or how he could help. He was a massive disappointment as he delivered nothing. Luckily for us, he left the companies early and was not able to acquire his negotiated share entitlements. I discovered some companies had not been so lucky with some of their appointments.

Scarred by this early experience, I then asked a lot more questions about potential Non-Executive Directors and discovered that my experience was sadly not unique. So my advice on this is really simple – before you appoint a Director ask some really sharp questions;

1. Can they really add value to your business?
2. Can that value be quantified – and therefore targeted? (Sometimes it can’t but they are still great to have on the board)
3. Is any reward linked in with that value?
4. Is there expertise best suited to being on a board? (For example, I rarely sit on boards – I am on just one at the moment, but still help over 10 companies at the moment in an informal capacity)
5. Will their appointment help your business’s standing? (with potential customers, banks, potential investors etc)

I should mention in the interests of balance, I have also had the pleasure of working with some brilliant Directors (and there are many more of them than the bad ones). I don’t want to use names on this blog as if I say good things; it could be seen as I am being paid by them and I don’t want to say bad things about people in case I get sued!

These great Directors add focus to a business, bring a wealth of contacts with them, help companies raise money and keep the management in check. As an investor, I am learning the importance of investing in companies with great boards, or if they don’t have them, helping put one together.

When I was at Leeds University (yes please note there is nothing between the word Leeds and the word University) I ran for the post of Financial Affairs Secretary which was a sabbatical post. I won the election and ran the commercial activities of the Student Union (brilliant experience) for a year. But the best bit of the year was meeting the University Bursar. He was a gentleman called Ray Head. At our first meeting he gave me some of the best advice ever.

“To be successful in life you have to be very ambitious and you have to be lazy”

The first bit made sense but I struggled with the second bit. He never did fully explain what he meant. Since I have started working, I have realised the significance of being lazy. What Ray meant was that you have to learn to achieve results through other people. Otherwise known as delegating!

It is so true. I have seen really hardworking people not get much done – whereas I have seen people who are focused get more done by using charm and respect to get others to achieve great things for them. They recognise that there is only so much they can do themselves. The worst possible combination is hard workers who are perfectionists as well – forget it!

The 3 R’s

In Economics we are taught about the importance of the 3 E’s; [tag]Efficiency[/tag],[tag]Economy[/tag] and [tag]Effectiveness[/tag]. The three of them are given equal status and much focus is being efficient and economical. If you are running a business – my advice is to just focus on one of them – [tag]being Effective[/tag]. Being Effective is about making sure you are doing the right thing.

To illustrate the point, we can all think of many times where we have spent ages doing stuff really brilliantly and on the cheap or we are quick to get something done urgently. We therefore demonstrate that we are economical and efficient. But we realise afterwards that we did not need to do the work – hence we were not effective at all. To be effective you need to step back from a situation or a project and say “Is this important?” Or “what am I trying to achieve?” Next time you see an episode of The Apprentice, look at the team leaders and ask yourself ‘are they being effective?’ I have yet to see a team leader ask themselves “what is this task really about?” Sir Alan does test different skill sets in each task – not just sales, but it is very rare that the teams find out what is being tested.

To sum this entry up, as a very good friend of mine – [tag]Rami Ranger MBE [/tag]says

“The problem with common sense is that it is not that common”

Enjoy being effective.

(thanks to http://packphour.wordpress.com/2007/12/08/common-sense/ for image)

Past readers will know that one of my bug bears is the way business people are portrayed in the Media – be it Eastenders (take your pick of the role models – either Phil Mitchell or Ian Beale!), Dragons Den or [tag]Alan Sugar[/tag] in [tag]The Apprentice[/tag]. We are not a good bunch are we?

There is this theory – that all the candidates on The Apprentice seem only too eager to prove is that to [tag]get ahead in Business[/tag] – you have to be prepared to bitch, destroy and trample over everyone. Focus means knowing what you want and getting it at any cost. If I may, I would like to mention that most of the business people that I come across (and many of them are very high profile and successful) are really nice people. They are people that you would want to work with and who see things as [tag]win-win[/tag]. They see their customers as their reason to exist – not mugs who must be duped.

I have worked in large multinational businesses and I would have to say that is where I came across characters like The Apprentice entrants – never in business. If you want to be successful in business – being a nice person is a good strategy! If you want to win the rat race (and still be a rat) get a job in a large organisation.

When I was starting my career as a Salesman at Duracell batteries, I was told to get on with people at all levels – and never ever patronize or look down on people no matter what they did in a company. I took this lesson on board without any difficulty (it helps that I came from a disadvantaged background – so have always found it easier to get on with people at all levels). I remember going in to see my biggest customer – the Duty Free Shop at Heathrow Airport for the big Christmas order. If I got this sale pitch right, the whole of my sales team would win an all expenses paid trip to Madeira (OK – not the best of destinations if you are under 80 years old – but still a free holiday is worth having). The sales director came with me and the pitch went well but then the buyer said – “let me ask the warehouse team if we have enough space to take your stock”. Because I had taken the time to get to know the back door staff they were happy to help me – and took the order.

Five years ago when I was working at PwC, a friend asked me if I would spend some time talking to a friend of hers giving them some career advice as she wanted to work in marketing for professional services. I was happy to spend ½ an hour on the phone with her. Last year I was pitching my services to a law firm – and the decision maker happened to be the same person! (I won the pitch).

It might sound very basic – but in my humble opinion, to be successful in business and in life – it pays to be nice. You do not have to stare at the mirror before a meeting shouting “I am a tiger”.

Ask yourself – what kind of people do you like working with and buying from? Well that is the kind of person you should aim to be.