Entrepreneurs, both corporate and non-profit, create their venture to fulfill a dream. As they formalize their mission, they seek advice from family, friends, business associates, fellow church members, the Internet, text resources, and special organizations such as MaRS. As their dream takes shape, they add the few people who will share their goals and provide their time, talent and treasure.
As an organization emerges, functions such as marketing, finance and operations are created by new team members—some who want to become part-owners in the venture, and some who wish to remain employees. The owner/founder needs independent help, advice and guidance from beyond this group.
Now is the time to create the first board.
In the early stages, the directors meet informally. Over time, directors ask for scheduled meetings, communication between meetings, and agendas in advance. As the board grows more formal, some of the early directors will step up to their responsibilities while others, for varying reasons, will drop out or remain in an advisory capacity.
Historically, there has been little attention paid to small businesses and their boards. One reason behind this lack of interest is that their boards were assumed to be“paper boards”—that is, that their members were relatives or close friends of the owner/founder, not objective and not trained or qualified to carry out the obligations of a properly constituted and functioning board.
Today, given the recent history of governance failures, there is increased political and regulatory pressure to set up active boards that contribute to oversight, risk-assessment and value creation. In summary, good boards give their businesses and organizations“the lead they need”.
The board needs to address a number of issues as the venture and board are formed Many issues involve the regulations, restrictions and controls that govern the activity of an organization as it brings its products and services to market. They form a checklist for the board as it starts the routine of meeting regularly.
Each of these business elements, and others not listed here, requires investigation to determine if they apply to your new venture. The key to early success is to address these issues from the start by connecting with experts who can guide your venture through its necessary compliance requirements.
There is a simple answer to this key question: “as soon as possible.” A better answer is: “before the end of the start-up phase.”
All ventures tend to go through at least four phases as they mature and survive. The first phase is startup, the second is emergence, the third is expansion and the fourth is sustainability. As this article discusses the creation of the initial board of directors, the start-up phase needs a brief explanation.
“Startup” begins when the entrepreneur embarks on pulling together the needed resources and commits to spending money in order to achieve the goals of the business plan. The startup phase ends when revenue from the sales and service provided begins to flow on a steady basis. In the case of the NPO that startup phase ends when individuals or groups of designated people begin to receive the guidance or service offered by an NPO.
In the case of a for-profit business, this process could take years (consider the creation of an electric car) or in the case of an NPO, it may take only a few weeks (consider a local church deciding to run a shelter service for the homeless in their community).
Taking into account all that you need to create a venture, good advice offers the greatest value. Even before you launch your venture, talk to peers and experts and seek guidance from sector associations or organizations like MaRS. This will help you reduce the unknowns and avoid pitfalls.
Certified General Accountants of Ontario (2008, February).Grassroots Governance; Governance and the Non-Profit Sector.Retrieved September 21, 2009, from www.cga-ontario.org/assets/file/publication_grassroots_governance.pdf