What do you need to know about installing a Board in your business? Inside Franchise Business asked Louise Broekman, advisory chair, to share her expertise.
1. How do you define a good Board structure for a business?
Every business is bound by law to have Directors who are accountable for the business. So,
essentially every business has a governance board. Many do not formally operate this way.
A good board structure should be relevant to the business objectives and structure. From a
governance board with Directors who are fully accountable to a formalised Advisory Board,
supporting Directors in their objectives, it needs to be fit for purpose.
2. You had a board for your franchise system, how did that impact you?
As the managing director, I managed the governance requirements of the business and had
a solid governance plan in place. I wanted a board structure that was a bit more flexible,
innovation focused but still held me to account. I developed an Advisory Board structure
specifically to meet my needs. It was ground breaking for both me and the franchise
business itself
3. You now support businesses to establish their own boards. How have board
structures changed?
Governance and board structures are under the spotlight currently. In the corporate sector
there is a governance crisis- both from directors failing in their duties and from stakeholders
losing trust in boards. Governance boards have become and will continue to be held more
accountable for management decisions.
There is a golden rule in governance boards – “ignorance is no defence,” so Directors will need to be across all aspects of the businesses they serve. Risk management is critical for governance boards and unfortunately, because of the business and personal risk associated with governance boards, innovation and growth may not have much time on the agenda. Because of this the shift in the market has been the emergence of Advisory Boards. They do not replace governance boards, but enable a
different long term strategic discussion to take place.
4. What are the challenges for different board structures for franchisors?
Franchisors, especially new or fast-growing brands, need to carefully manage their
governance requirements including risk and growth strategies. They need a clear structure and the right people around the board table to accelerate their strategy. The trend in larger networks to have both a governance board and an Advisory Board enables risk and growth strategies to be addressed. This has to be carefully managed though.
Having multiple conversations about the same thing is poor use of time and talent. Clear agendas and independent Chairs enable good management of where conversations and decisions are held.
5. When should you set up a formalised Board structure?
From day one. A governance plan should be part of every business start-up. Board structures and board positions (both Directors and Advisory) should change with the different phases of business.
6. Are there specific factors that impact board structures for franchisors?
Having been a franchisor myself, I see the challenge of managing risk and opportunity both within and on the business. Franchise systems have to constantly review internal relationships, risk and opportunity within the “business system”. Sometimes this overshadows the focus of total franchisor strategy and governance as a “business”.
7. How do you select directors and advisors?
My opinion is that every business should review the effectiveness of their governance and board structures at a minimum of every three years. Three years is a long time in business and things change, including the size of the business, the business cycle and the market. Directors and advisors should in my view be selected based on the business priorities for the coming 18 months – three years.
Having members of the Board that are independent of each other and selected for their experience, skills and ability to exercise good judgement enables better decisions in the long run.
8. What is the role and function of a Chair?
The Chair is the foundation of a good board. Independence is critical. I see from time to time business owners chairing their own board. I think this is problematic as business owners cannot participate effectively in their own meetings. An independent Chair sets agendas, keep business owners on track in between meetings, ensures everyone contributes and maintains quality structures to manage governance.
9. What structures should you have in place for a Board to be effective?
Business owners gain as much value from a well structured process as they do from the voices of their board members. A quality board structure includes a clearly defined Charter, Meeting Protocols, practical and informative board packs and well articulated agenda.
10. How do boards interact with Franchise Advisory Committees?
There is a strong link between Franchise Advisor Committees and the Governance or Advisory Board structures. I personally believe Franchise Advisory Committees and Advisory Boards work well together as they are both a consultative/problem solving model.
Governance Boards are effectively a decision making model so the function is quite different. Managing expectations, agendas and meeting flow should be part of the design of your governance planning in the first instance.