Juntas directivas

COVER STORY

BY SHELLY BUCKSOT, ASSOCIATE EDITOR

Why Every Small Business Needs a Board of Directors
For 160 years, Hackett True Value was a one-store operation, but between 1998 and 2003, the company experienced dramatic growth, opening three new locations. Fortunately, Norman Garrelts, president and ceo of the Patrick Hackett Hardware Company, put together a working board of directors in1995 that was available to help steer the expansion. Otherwise, he doesn’t think the growth would have happened. “The board has taken on even greater importance now that we’ve expanded,” he says.

T

he board became even more integral at year’s end when a bonus was suggested for Garrelts as a result of the company’s success. Though he was a salaried executive, the board voted in favor of ayear-end bonus, but not for the two store owners who were also involved in the expansion efforts. According to the board, their compensation would be tied into the long-term expansion of the business. That, the board argued, would affect their bottom line, not Garrelts’. Again, had the board not been in place, Garrelts believes the outcome would have been much different and much more costly for thecompany. Succession, expansion, executive bonuses, sales forecasts and myriad other considerations define the strategic decision-making skills of all business owners, especially those of small, family-owned companies. The business landscape for these owners can be at times smooth and easy going, while at other times confusing and treacherous. The decision to insulate the business with a board ofdirectors is one that can make the road much
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more manageable; unfortunately, fewer than 10 percent of United States’ small business owners choose that route. The objections are, at first glance, easy to understand. Many small business owners, especially those in the hardware industry, built their companies from scratch and feel that anadvisory board comprised of outside directors would infringe on their autonomy and independence. Further, many small businesses are flanked by several family members who may view the outside board as an intrusion on their namesake. But Dr. Leon Danco, Ph.D. and cofounder of The Center for Family Business in Cleveland, Ohio, asserts that these objections are short-sighted and could ultimatelycompromise the longterm solvency of the business. In his book, “Outside Directors in the Family Owned Business,” Danco says that commonly blamed scapegoats, such as taxation, inflation, ruthless competition, unproductive labor, technological change, overarching governmental regulation or even the alleged decline in the work ethic of the young, are not the chief causes of the demise of America’sfamily-owned businesses and privately held corporations. Rather, it is the inaction of the company’s ruling body to enact change and progress the business they helped build that leads to decline. According to Danco, “no well-run business, family-owned or not, can operate efficiently over any extended period of time without a periodic review of both the actions of its executive officers and the policiesthey pursue to meet the challenge of the future. And the body best designed to deliver this review is the board of directors.”

Norman Garrelts, president and ceo of the Patrick Hackett Hardware Company, created a formal board of directors in 1995 through the course of networking in his local community. “The only way to keep motivated and do things according to standard accounting practices was toenact a board of directors,” says Garrelts.

Appointing the Right People
Regardless of the longevity of a business, an outside board of directors is imperative to the success of any company, and if the business is a corporation, an outside board is often required by law. Once this realization sets in, however, business owners too often appoint the wrong group of advisers to help steer their...