Establishing a board of directors can be a pivotal step towards success. Recently, I sat down with Kathryn Seymour, President and CEO of First Supply, for a Driven by DCKAP interview. We delved into a variety of informative topics and also discussed the importance of boards in business. Kathryn’s insights offered valuable lessons on when and how to constitute a board, especially for companies transitioning from family-run operations to more formal governance structures.
When to Constitute A Board
For many companies, especially family businesses, the decision to form a board often comes as part of an evolution towards more formal governance. Kathryn shared that, “Just having for many companies, it’s a bit of an evolution in terms of having a maybe a trusted board of advisors. Maybe it’s not a fiduciary board to start with.” This approach allows companies to transition smoothly by first establishing a board of advisors before moving to a more formal fiduciary board structure.
Benefits Of Starting Early
Starting with a board of advisors can provide several benefits:
- External Insights: Advisors can offer fresh perspectives and expertise that might not be available within the company.
- Flexibility: A board of advisors is less formal than a fiduciary board, allowing for easier adjustments as the company grows.
- Preparation for Future Governance: It helps prepare the company for more formal governance structures by establishing processes and protocols.
Who Should Be On The Board?
When designing a board, it’s crucial to include a diverse set of members who bring different expertise and perspectives. Kathryn emphasized the importance of external support, stating, “So we’ve added to actually sitting CEOs of local businesses both family businesses, one in distribution, one in manufacturing to the board.
And then we have someone who was a retired chief technology officer of a manufacturing company, and then another gentleman who does a ton of M&A, and that’s a, that’s a really core competency that he brings to our board, along with a strong finance background.”
This diversity helps ensure that the company receives comprehensive advice on various aspects of its operations.
Key Roles To Consider
- Financial Expertise: A member with strong financial acumen can help guide financial decisions and ensure fiscal responsibility.
- Legal Counsel: Legal expertise is essential for navigating regulatory issues and ensuring compliance.
- Industry Specialists: Members with deep knowledge of the industry can provide insights on market trends and opportunities.
As technology continues to transform industries, having a tech-savvy board member can help guide digital transformation efforts.
Related read: Notes On Family Governance & Succession Planning
Benefits Of A Board For Distributors
A well-constituted board of directors can be incredibly beneficial for distributors. It provides strategic guidance, helps navigate complex business environments, and ensures that the company remains competitive. For instance, a board can help distributors make informed decisions about technology investments, such as implementing ERP systems, which are crucial for managing inventory and customer data effectively.
Kathryn highlighted the importance of innovation and people in the process, she noted about her uncle, Ed Felton, who was running the business at
the time, “He was all about training, and he was all about making people feel connected to the process.” This emphasis on people and process is key for distributors looking to modernize their operations and improve efficiency.
How Boards Enhance Distributors
- Strategic Guidance: Boards provide valuable insights and strategic advice, helping distributors make informed decisions about market trends and technological advancements.
- Risk Management: By overseeing financial decisions and operational strategies, boards can help mitigate risks and ensure the company’s stability.
- Networking Opportunities: Board members often bring extensive networks that can be leveraged for partnerships, recruitment, and market expansion.
- Succession Planning: A board can play a crucial role in succession planning, ensuring a smooth transition of leadership and maintaining continuity.
How Boards Help Distributors Adapt To Change
Distributors must be agile and adaptable. A board can help in several ways:
- Market Analysis: Board members can provide insights into market trends and emerging opportunities.
- Digital Transformation: Guidance on technology investments can help distributors stay competitive in a digital age.
- Regulatory Compliance: Legal expertise on the board ensures that the company remains compliant with changing regulations.
First Supply’s Board Evolution
First Supply’s experience highlights the value of external guidance from its boards.
Kathryn mentioned that, “We started with three independent directors, and then we’ve gone through, we’ve instituted a refreshment policy.” This approach ensures that the board remains dynamic and effective over time.
Lessons Learned
- Diversity Matters: Ensure that the board includes members with diverse backgrounds and expertise.
- Regular Refreshment: Implement policies to refresh the board periodically, bringing in new perspectives and expertise.
- External Networks: Leverage board members’ networks to expand the company’s reach and opportunities.
Forming a board of directors is a strategic move that can significantly enhance a distributor’s ability to navigate complex business environments. By incorporating diverse expertise and maintaining a strong connection with external advisors, companies can ensure they remain competitive and well-positioned for future growth.
