Strategic Planning in the Small Business

Unit 6

HO

6-5 (Continued)

Empirical

studies attempting

to measure

the contributions

of outside boards

and directors

have been performed

by many

researchers tinder

many different

conditions

since the mid-1950s

(Vance,

1955, 1964,

1983; Lanser,

1969; Cochran,

Wood, and

Jones, 1985:

Kesner, Victor,

and Lamont,

1986; Ford,

1988, 1989;

Fuchsburg,

1991). The

typical result

has been to

correlate outside

directors

with a reduction

in some measure

of firm performance.

I have also

published

results of

extensive case

studies which

have shown

many detailed

examples

of

ineffective

outside boards

and board

members (Ford,

1989, 1992).

None of these

studies offer

any

significant

empirical evidence

to support

the notion that,

in general,

boards of directors

(at

least outside

boards) help

small businesses.

There have been

many reasons

postulated

for the dismal

picture that research

paints of

boards and

outside directors.

I have previously

suggested

that there

are two primary

weaknesses

of outside

directors:

(1) their lack

of knowledge

about the firm

and its environment,

and

(2)

their

lack of availability

to the

firm (Ford, 1988).

This simply

suggests that

outsiders cannot

walk

into the board

room of a business

and automatically

become

a contributing

asset by

the

mere granting

of the title

of director.

Building a viable,

effective board

of directors

takes a lot

of

work, and this

is not usually

recognized by

small firm owners,

or, if they

do recognize

it,

they do not

know how,

or have the time

and other

resources necessary

to complete

the task.

I referred

earlier to case

research I had

published concerning

ineffective

boards

and

directors.

While

these examples

are plentiful,

I have also

found many

examples of

highly

effective boards.

However,

they offer encouragement

that

give time, sufficient

:zsources,

and,

most

importantly, a

proper attitude

by owners and

managers,

boards can be

developed which

become

powerful tools

to help small

businesses.

Some of the

examples I

have detailed

elsewhere

include outside

directors and

boards that have

secured desperately

needed

bank loans,

found private

placement investors

for cempany

stock, opened

doors to

significant new

customers

and supp!iers,

helped management

make

decisions about

new strategic

initiatives, and

simply

served

as all around

sounding

boards and mentors

(Ford, 1989,

1992).

These board success

stories

do not occur by

accident, not

do they occur

quickly in terms

of the board's

development

life cycle. Building

an effective

board is

a.major undertaking

that

many

company owners

are not

willing, or perhaps

ready to make.

It can be

done, however,

by

any firm

owner/manager

who believes

it worthwhile,

and is willing

to make

the appropriate

investment.

Can

boards of directors

help?

This

leads us

to the second

question: "Can

boards of

directors really

help small

businesses?"

The answer

to this question

is a resounding

yes!

A well developed

board can

be

a very valuable

tool for many

small businesses.

How can

it happen? Developing

a board

must begin

with top-level

commitment.

A

board

cannot be

initiated by a

junior officer

or employee.

If the one at

the top does not

want

the

forum, than it

will not happen.

Also, this

commitment needs

to be based

on a realistic

set

of board
objectives.
A board
of directors is
a tool -and
only a potential
one during
the

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