Gill South: It won't kill you to seek advice, but it may kill you if you don't

If you are the manager or owner of a fast-growing business, it's highly likely you are drawing heavily on the skills of your independent board of advisers right now. If you haven't got those advisers, you are putting your business in danger, say governance experts. One of the big mistakes that self-made companies make is leaving their board until it is too late.

The biggest single issue in New Zealand's productivity is the failure to get smart independent advice, says Don Jaine, head of management consultancy Seqel. Many boards are full of accountants and lawyers who are not fit for the job, he argues.

It is often not until death, illness or out of loneliness that business owners start looking for external help, he says. Their concern is often that they can't afford it. "I think the real problem is they only focus on cost, not value.

"A lot of these people deliver value."

Jaine has recruited three experienced corporate high-flyers to give independent advice to the country's large private companies and assess their need for a board of advisers. The three are Kim Ellis, formerly of Waste Management, David Sixton, former chief executive of Fletcher Challenge's Building Products Group, and Mainfreight and Ports of Auckland director Emmet Hobbs.

Small to medium-sized enterprises (SMEs), meanwhile, will be a target market for SpringBoard, a new organisation that aims to give younger directors (45 and under) some formal training and a collegial environment to network in.

Co-founder Simon Telfer says SMEs tend to be happy to take on younger directors with the skills they need.

Waiting until people have finished their careers before looking for directorships is short-sighted, he argues.

The director of a strategic planning business, Stimulus, Telfer says: "I get a lot of owner-managers coming to me saying, 'We have run out of steam, we need a "where to next?", we've been plateauing operationally.'

"Sometimes owner-managers don't want to feel challenged, they can feel threatened by recruiting someone brighter than them, but some new directors on the board will get them re-enthused, and taking a few more risks."

A fresh board would stimulate a move in a strategic direction, he says. It also provides governance, a much maligned word these days. "There is a misperception that governance is equated with compliance and risk aversion rather than input and growth," he says. "Now the thinking is that governance should be all about strategy and growth."

SpringBoard co-founder Vicky Taylor, whose company Smartfoods makes Vogel breakfast cereals, says things have to be made easy for companies by providing them with a plentiful supply of directors to help their businesses.

"Younger directors may bring a valuable world view to the board table that is materially different from their [parents'] experience: comfort and expertise in a digital world, using social networking for business purposes, a sense of energy and adventure and an appetite for risk," she says.

In November SpringBoard is partnering with the Deloitte Fast 50 in running an event which will discuss governance in a high-growth environment.

"I am a large advocate for governance, as someone who deals a lot with early growth companies," says Deloitte partner Matt McKendry.

"In my venture capital world I see a lot of situations where people have not gone to extraordinary lengths to set up a formal governance structure."

New Zealand entrepreneurs often have a "lack of willingness to share", but should realise that having a supportive governance advisory group is "the first step to being a grown-up", says McKendry.

"Boards should fill the gaps that are missing in the management team - if you do have a gap in international markets, it makes sense to get someone on board who has got these skills," says the former dotcom entrepreneur. Boards should be about setting strategy, he says.

If the approach to governance is that it is a forum to set some well-defined boundaries, and give the entrepreneur a sounding board, it wins, says McKendry.

It can be a good way of testing ideas, rather than doing them simply because the entrepreneur has just read a great blog, the Deloitte partner observes.

The board should evolve with the company, says McKendry. Board positions should be rotated, so the skills move with the evolving company.

Chairpersons, meanwhile, are critical in their ability to guide and support the CEO and put in boundaries. "It is really important that that person is quite experienced. If the founder is an idealistic young character, you do need to moderate that with maturity," he says.

While he supports SpringBoard with its younger heads, he believes you can't beat experience. He advises having a couple of grey-haired directors and a couple of contemporaries, for companies to "mix it up". Other contacts for directors of emerging companies include business incubator The Icehouse and the Institute of Directors.

The Deloitte partner stresses the importance of putting your board on a formal footing: "You have to pay them, then you can expect performance. A number that we see are a bit of a freebie."

Gill South is an Auckland freelance writer.