Originally Published in HVACR Business Magazine.
In the 1988 movie, “Tucker: The Man And His Dream,” Actor Jeff Bridges plays great entrepreneur Preston Tucker. He is forced to hire a board of directors with prestigious names that will allow his company, the Tucker Corporation, to excel and go public. Robert Bennington chaired the board and eventually took over the company. Bennington then vetoed every great idea that Tucker had for the company. The board, with the help of Congress, put Tucker right out of business.
For many small business owners, what happended to Preston Tucker is what most think about when someone mentions having a board of directors. But let me assure you that this is not what I am talking about when I suggest that you form a board for your HVACR company.
To be clear, there are four different types of advisors: A Board of Directors; Mentors/Business Advisors/M.I.X Groups; Family Council and a Board of Advisors.
Some of you may be thinking that you have good people in place, and don’t need help. Others might be convinced that they don’t need outsiders telling them what to do or that boards are for bigger companies. Other reasons also might include:
- can’t afford them.
- No one would want to be a board member in my company.
- We already have board members — our employees, family and my attorney or banker.
- I am active in an association/group already.
Well, I thought some of the same things at one time. However, if you want your business to really grow and set long-term goals for the future, you may want to reconsider. Will Rogers once said, “Even if you are on the right track, you’ll get run over if you just sit there.”
What are your weaknesses? Is it in marketing, accounting, team building or human resources? What about strategic planning and/or operations? Recruiting a board of advisors requires careful thought, because the outside members you seek should off-set your weaknesses.
The company should select different advisors for different reasons. Some may be recruited to provide added credibility. Well-known leaders in your area can be especially helpful. The McAfee Board of Advisors consists of three very skilled and successful business people. One is a successful owner and great national leader in the landscaping industry; another is a human resources expert who assisted in most of the hiring for the Iams Co.; and the third is a former owner of a manufacturing company whose specialty is developing the core operations of a company.
As I mentioned earlier, I have some great mentors in the HVACR industry, but gathering knowledge from these mentors and advisors is normally on an as-needed basis, and the topics we discuss mostly pertain to the industry. Although I value and respect my mentors, I prefer not to do everything they do. My board offers new and fresh ideas that work for my company.
Although my relationship is very good with my vendors, banker, attorney and accountant, I don’t recommend having advisors on your board who are also on your payroll. Why? Because a potential board member should have no desire to promote or generate income for their firms, but rather to help your company perform at a higher level.
However, your vendors, bankers, attorneys and accountants can be good resources to identify prospects for your board. As you are reading this, you may know someone that would be great on your board. Consider newly retired company executives, college business professors or senior executives in other industries that have a proven track record of success.
Forming and running a board of advisors is not as complicated as it sounds. It doesn’t require any voting and uses an informal structure. More than likely, your board members either sit on other boards or have one of their own, so they can guide you through the process. Since trust and confidentiality are so important, have an attorney put together a one-page letter of indemnification and a hold-harmless agreement. It’s a low-cost investment that is worth it.
When you’ve located a candidate for your board, take the time to interview them. Take them to lunch a few times and make sure they fit. Also ask for references before making a final decision. Your first board member can help you find others. You want people who are independent thinkers and who are not afraid to challenge you. In other words, you don’t want a rubber “yes” stamp. Define your working relationship. Talk about what you expect from them and ask them what they expect from you. Good communication throughout the entire process is the key to making it work.
So what do you pay these professional advisors? Well, if they ask about pay or salary during your interview, then exclude them from your list. The pay is just a side benefit for helping you and most members don’t need the money. Typically, $400 to $700 per board member, per meeting is a general price range. That is less than $3,000 per year to tap resources in your area that your company cannot product on their own.
On average, a board meets four times a year, for about four hours per meeting. It’s a good idea to give them dates, times and locations a year in advance so that everyone can plan on attending. It’s also a good idea to take their checks with you to the meetings and pay them right after they end. However, these meetings should not be the only time you meet. Opportunities or challenges may arise that require meeting for breakfast or lunch on occasion with some or all of your board to discuss concerns or ideas. A quick phone call or email will also occur from time to time.
Remember, the job of a board is to be a resource to the owner/CEO and the business overall. They will ask questions and make recommendations. My first McAfee board meeting was about four hours of sharing information, and allowing them to get to know me and the company. I gave them a brief history lesson and brought them up-to-date on the company. I also told them about my long-term goals. They asked a lot of questions and I gave them lots of information. They began to learn about my passions and get the pulse of the company.
Your board will need to know all the details of your business, no holds barred. You will need to share your finances, future goals, company vision and your strategy for getting there. With that in mind, the most important question for you is whether or not you are willing to listen and act on sound advice? If you are not good at taking advice and wanting to improve, then this board idea may not be for you. Remember, you don’t have to do everything that they recommend. It’s your business and you should always make the final decisions. However, it’s to your benefit to be very open-minded and trust your board’s instincts and wisdom in certain areas.
Clay Mathile, former CEO of The Iams Co. in Vandalia, Ohio, sold Iams (a private company) to Cincinnati-based Procter and Gamble Co. in 1999 for $2.3 billion. When Clay had revenue up around the $200 million mark, his board told him it was time to bring in someone else to run the operations of the company. Needless to say, this idea did not sit well with Clay. According to him, it took almost a year for him to even consider the idea. Then another few years to actually find the right person for the job. But in 1990, Tom MacLeod, former president of the bakery division of Sara Lee, became the new president of Iams. No entrepreneur (we are first entrepreneurs, and then contractors) wants to hear that he or she needs to change or that someone else could do a better job in our own business. Clay will say that he didn’t either. However, what he found was that he and Tom worked well together… as Clay remained the CEO and visionary, while Tom filled the president’s position. Together, they took the company from $200 million in sales to over $1 billion.
Whether your company is very small or large, the benefits of having a board will get you to the next level and beyond. You still own the agenda; the strategy and continue to lead your company to new levels, while your board uses their skills and experience to assist you by offering unfiltered insight, and giving fresh ideas.
If you want to make future progress, then a board of advisors is for you. If you can’t afford to hire the talent, then rent it by recruiting the best available advisors in your area. Recalling the words of the great inventor Charles Kettering, “There exist limitless opportunities in every industry. Where there is an open mind, there will always be a frontier.”
Greg McAfee founded McAfee Heating & Air Conditioning Co., Inc. in 1990 when he was just 27 years old. More than 19 years later, he is a leader in the residential HVAC market in Dayton, Ohio. Greg now consults and teaches others how to succeed.