Advisory board Archives - TAB Corporate

Time to Get On (a) Board

When Two-to-Ten Brains Are Better Than One

When you think of a successful business, you usually think of the business owner or CEO at the top of the firm calling the shots. Yet behind every effective CEO, there is a strong board (or as ABC News questions, “Behind Every Failed Firm, A Bad Board?”).

Professor Stephan Bainbridge of UCLA School of Law authored a research paper titled Why a Board? Group Decisionmaking in Corporate Governance. This study cites group decision-making research going back as far as the 1930s. Bainbridge writes “numerous studies have found that group decisions are not only superior to those of the average member, but also to those made by the very best individual decision maker in the group.” Translation: a board of directors can be a huge benefit to a lone small business owner.

Why should I – a small, private business owner – have a board of my own? 

  • All In The Family.  Family and partner disputes can be very challenging for a small business. Board members can provide objective analysis that can help resolve these difficult emotionally-charged challenges.
  • Be legit. The board meeting adds legitimacy to the business and the business owner’s decisions. This is especially valued by banks, investors in the business, major clients, and employees.
  • Diversity in experience. The board usually provides a broader range of expertise than a typical small business can assemble. For example, boards often have advisors in diverse areas such as legal, financial, marketing, human resources, and technology.
  • Breathing Room. Board meetings ensure that the business owner spend some time each month working on the business and not in the business. Many small business owners would love to take a step back but instead are constantly caught up in the events of each day. The board meetings provide the opportunity to focus on the business strategically.

It has been proven that the board makes better decisions than any individual. 

OK, I need a board. How do I assemble one? More importantly, how do I pay for it?

A board of directors or advisors probably sounds great to any small business owner, right? Most business owners feel completely alone at the top. It would be difficult for small private business owners to get a quality board of advisors as volunteers. They could go the route of reaching out to specific individuals who have given them good advice in the past and compensating them for that advice. This is beyond the reach of most small business owners. Fortunately, there is an alternative: forming your own board of directors through a peer advisory organization.

Where would I find a good peer advisory organization?

The Alternative Board (TAB) is a membership organization that organizes boards comprised of owners of non-competing businesses. TAB boards meet once per month and discuss the challenges and opportunities facing each board member. Because board members are all small business owners, and our experience is that all businesses share 70% of the same challenges, the advice among the board members is relevant. The board members provide experience-based advice to each other.

Here’s the real beauty of TAB boards. Even in a public company board, individual board members have a bias. Some of them were hand-picked by the CEO. Many of them are getting paid to be on the board. Celebrity CEOs can run over the board (Apple, for example). There is also a level of group-think that creeps into public company boards due to the culture. With TAB boards, there is no bias. TAB members are on the board for one reason and one reason only: to offer and receive objective advice to help each other run better businesses. A TAB member may not always like the advice they receive but the advice is sincere, objective and experienced-based.

What have you found to be the greatest benefit of your board?