Building a business is often a labour of love. If you’ve slogged away for years to build up a successful enterprise, the thought of letting other people have a say in what goes on can be daunting.

But opening up to the new ideas, viewpoints, and expertise of a board of directors could be an important step in driving your business forward.

A board is a group of advisers to a company who set policies, oversee the managers, and help make decisions on major company issues.

Every company listed on the share market must have a board of directors. Some private companies and non-profit organisations also have them.

Look at the bigger picture

If you’re running a small business and are looking to grow, move into new markets or products, it might be time to look at bringing in some external skills and experience.

A common problem for business owners is getting caught up in day-to-day tasks and what needs immediate attention. That can mean losing sight of the bigger picture or long-term goals.

A board gives perspective, allowing you to work ‘on’ the business, rather than ‘in’ the business.

They can provide a fresh perspective and look at the business through a long-term lens.

They can also help set, or reset, the vision and strategy for your business, assess potential future challenges and opportunities, set performance goals and objectives, and make sure the company’s financial and legal obligations are being met.

Trusted advisers or a formal board?

If you’re considering appointing a board, there are a couple of different routes you can take.

An advisory board could be ideal if you’re after people to bounce ideas off and provide valuable business strategic insights.

An advisory board has no legal obligations or control over the business. They can offer advice, but have no authority to make decisions.

Or you could appoint a formal board of directors, who all have legal responsibilities and obligations.

Directors are appointed by shareholders and are legally required to act in the best interests of the company.

It’s important to get the right people, who not only have the right skills, but the time and ability to commit to the role. You don’t have to look far in the media to see the potential consequences of directors failing in their duties.

Different types of directors

· Executive directors. An executive director is an employee of the company. They bring an insider’s perspective of the operational side of the business to the board table, but it’s important that they maintain a degree of separation between their board role and their day job.

· Non-executive directors. A non-executive director brings an external perspective to the board table and will sometimes represent a major shareholder.

· Independent directors. Apart from a seat at the board table, independent directors have no other affiliations with the business or shareholders.

What are you looking for?

Ideally, your board will be made up of people who bring a diversity of skills, thinking and experience to the table. A broad variety of opinions, perspectives, and backgrounds can lead to innovation and fresh thinking.

A range of expertise is also important to cover off the board’s important strategic, legal, financial, and regulatory obligations.

How do you become a director?

Directors will often have a successful corporate or business background and are keen to share their skills, networks, and expertise.

When looking to make appointments, boards consider a variety of factors, including a proven track record in business, a good reputation, a diversity of skills, and an ability to contribute strongly in the boardroom.

How much do directors earn?

The amount directors earn is often a hot topic. The amounts vary depending on, for example, how large a company is, what sector it’s in, or if it’s a not-for-profit.

Our 2018 survey found that the median fees for non-executive directors was NZ$45,000. This median figure includes directorships at large New Zealand Stock Exchange-listed companies, which pay a lot more than a smaller business would.

Organisations with revenue of up to NZ$5 million pay directors a median of NZ$13,000 a year. Organisations with revenue of between NZ$5.1 million and NZ$10 million pay a median of NZ$24,000 a year. Not all directors are paid.

Appointing directors

Don’t fall into the trap of simply appointing people you know to your board.

Tap into your network for recommendations and try to meet as many people as possible – a recruiter could help with this.

Write down a description of the skills, experiences and personal characteristics you’re after.

Spell out what the main duties and purpose of the role will be, how long the appointment will be for, what the pay will be and how much of a time commitment you expect.

First published 28 February 2019

This article does not contain any financial advice and has not taken into account any particular person’s circumstances. Before relying on it, we recommend you speak with a financial adviser. This story reflects the views of the contributor only. Content comes from sources that we consider are accurate, but we do not guarantee that the content is accurate.