Extend the board with external members and increase productivity up to 80%
A recently published report from Centre for Owner-Managed Businesses – CBS states that productivity in owner-managed businesses will increase by 80% if external board members are inserted.
The report is based on new data from Danish businesses and naturally, it provides an average picture. How much a business can increase productivity depends on the situation of the business, but clearly there is a benefit of inserting external board members.
In Unique Human Capital, we often experience that owner-managed businesses have family members and/or an accountant on the board. However, as stated in the report, it can be a great advantage for the business to elect external board members based on the competences and relevant experience they can contribute with, as this is the foundation for growth and productivity.
External board members will often have the necessary experience, professional competences or relevant educational background which qualify them to exploit the business potential and create growth. Many “family-related” board members are not close enough to the business to contribute to and exploit the potential of the company. The analysis in the report states that taking in external board members will have a special effect on productivity, especially in companies with 10-49 employees.
With many years of experience in counselling owner-managers and following the development in small and medium sized companies, it is also clear to us that the owner-manager can exploit the company’s potential by hiring external board members with the necessary qualifications and competences.
Although searching for candidates and hiring external board members requires an investment, the report concludes that “external members systematically contribute positively to both the company’s productivity and to an increase in turnover” (p. 49).
Our experience is that boards and directors have moved closer together and have become a strategic working group. Moreover, the chairman of the board can be an important sparring partner to the owner manager.
We know that finding the right candidate can be difficult and not least to clarify the competences that secures a valuable board composition for the owner manager and the company. Therefore, we have developed precise tools and processes to support the owner manager in clarifying the competences of the individual members as well as of the total board.
Among others, our competences secure a clarification of:
- Qualifications required
- Which competency profile can complement the overall board
- Experiences of the board member
Centre for Owner-Managed Businesses has recently published the report: “Boards in owner-managed businesses” (only available in Danish). The report was made by Professor at Copenhagen Business School (CBS), Niels Westergård-Nielsen and PhD Fellow at CBS, Casper Lavmand Larsen.
Read it here: https://www.cbs.dk/files/cbs.dk/rapport_8_2.pdf