Too Small for a Board?

By Mary Cameron

Mary Cameron is the chair of Habitat for Humanity International, chair of a private lumber company and sits on two other boards. She has served on over 40 public, private, crown and not-for-profit boards. She’s also a former CEO of three different private companies and a former deputy minister.

We often get asked – how big does a company need to be to have a board?  

When we first started the Ozone Advisory Group, we thought only big companies should have a board. We had a strong point of view that companies needed to be a minimum size and at an established stage to benefit from having a board.

We believed that in the early stages, owners and staff didn't have the time and energy to spend on creating, informing, and meeting with a board. We thought that perhaps a group of trusted advisors might be beneficial, but a board would be too much structure for an early stage company. Boards can also be costly – requiring time and money – both of which are scarce for early stage companies.

Over time, we learned that even – and perhaps especially – small companies can benefit from having a board. This article is about one example from our own community that proved this to be true.  

Token Naturals’ Story

Early in their journey, we met the owners of Token Naturals - a newly created Canadian company in the cannabis products field. They had heard us speak about the benefits of a board and asked us to help them build one. The first decision was to make it an Advisory Board, operating with the discipline and structure of a fiduciary board, but without fiduciary responsibilities. 

Then we worked with the shareholders to outline the ‘Voice of the Shareholder’ describing the shareholder intentions. We proceeded to define the key experiences, skill sets, and mindsets (explored further in our member Insights) that would be most beneficial to help Token Naturals navigate the emerging market. Due to the nature of the new regulations, we identified that Token Naturals had a few unique requirements for their board to have, including manufacturing under new regulatory requirements, B2C marketing (particularly in consumer products within the food or medicine industry), experience in scale-ups, and licensing approval experience. We were up to the challenge.

Creating the Board

We started by finding a strong leader to be the chair who was a strong and seasoned business and governance generalist. Next we added a senior executive and engineer from chemical manufacturing with experience scaling products from the lab into full production, and a marketer who had experience in pharmaceutical products, including taking the pharmaceuticals through the regulatory approval process.  

The board was ready!  

We discussed with all involved that the board has to move at the speed of the business, particularly with an early stage company. The board packages will not be robust, and the meeting schedule will be somewhat ‘on demand’.  

First Board Meeting

Prior to the first meeting, the directors were given the plans for the proposed manufacturing plant. The board, leaning on their collective experience, made some observations about the construction. In the first two meetings, the board suggested staging a significant portion of the planned capital expenditure on equipment.

This was a complete shock to the business. Instead of endorsing the proposed capital investment, the directors explored with management the idea of purchasing products rather than manufacturing themselves, focusing on fine tuning the market opportunities first until they had final Health Canada approvals, which all knew would take time particularly as the industry was in its infancy in Canada. 

Success Story

The CEO of Token Naturals, Kennan Pascal, reflects several years on “if we had not had the board, and been guided to that early decision to build our facility in stages (and not get swept up in the emerging market hype), we would not be in business today. From the very first meeting, and every meeting since, the board has added great value and business insight. One of the best decisions we have ever made!”

We have learned from this example that as long as the board is designed to meet the needs and strategy of the business, and the shareholders are clear about their intentions, a board can often be a key ingredient to success. This can be true at any stage.   

Reasons for Having a Board

Today when we are asked to help a company design a board, we don’t speak to the size or stage of the company. We ask if the owners and executive team are ready for a board. We ask their reasons why they want one. The reason could be a change in ownership; succession; a significant change in business conditions or strategy; setting up for exit; dealing with complex decisions; or managing growth. More commonly a board is created in a time of crisis, which is not ideal. 

The best reason we hear is that the owners and executives feel that a board can add focus and clarity on strategy and dealing with complexity. Even for early-stage companies, a board can add significant value by creating clarity on a winning strategy, stress-testing the business model, identifying sources of capital, and getting the pitch to resonate. We have often heard that the most valuable contribution is the board forcing the team to focus!  

Conclusion

Having a board is not for every company. However, once we hear the owners and executive team are truly ready for a board, we work with them to ensure they get the board they need – one that can add value from the very first meeting.

And as we discovered, for some early stage companies, can you afford not to have a board?

Do you want to learn more about designing your Board? We have lived it and helped several companies find the right fit. Explore our High-Performing Board program or our approach to Board Design.