The People Factor: The Biggest Challenge for SME Boards In the world of small and medium enterprises (SMEs), the most significant issues often boil down to one thing: people. Imagine a business run by five individuals, with a board overseeing their efforts. Now, picture two of those board members who simply shouldn't be there. This scenario is more common than you might think, and it underscores the critical need for retooling both the management team and the board itself.

Private Equity's People Problem Private equity firms consistently find that their biggest challenge is people. Recruiting the right board directors is paramount. It's not just about filling seats; it's about getting crystal clear on the specific skills and attributes needed for each board. A thorough skills assessment is essential, diving deep into the granular details to ensure the right fit for the board's unique needs.

The Perils of a "Gotcha" Attitude One of the most detrimental attitudes a board can adopt is a "Gotcha" mentality, where the primary goal seems to be catching the CEO and management team off guard. This approach is counterproductive and shocking, considering that the board's role is to support and motivate the management team. Boards must remember that they are there to help, not hinder.

Fiduciary vs. Advisory: Clarifying Roles Is your board fiduciary or advisory? This distinction is crucial. Everyone around the table must have clear expectations. Without alignment, the board and the company are destined to go nowhere. Understanding the voice of the shareholder is also vital. What do the shareholders expect? This clarity can guide the board's actions and decisions.

The Importance of a Board Charter Every board should have a charter. This document outlines the role of the board, helping to define its mandate. When new directors come on board, the charter serves as a valuable reference, detailing the terms of reference and the time commitment required. It ensures that everyone is on the same page from the start.

Independent Shareholders: A Valuable Asset The size of the board matters, and independent shareholders are becoming increasingly useful. Unlike shareholders with a vested interest, independent shareholders don't have skin in the game, which can help keep the board out of trouble. Their impartial perspective is invaluable.

Committees: Do You Need Them? Committees can be beneficial, but they should be used judiciously. Ad hoc committees can address short-term projects effectively. However, without a clear board charter, even the best people can't contribute at their highest level. Structure and process are essential.

The Need for Structure People need structure to thrive. An annual calendar with key meetings scheduled in advance is crucial. Board materials should be prepared thoughtfully. Sending out 200 slides 24 hours before a meeting is a waste of time and does not allow for meaningful discussion.

In conclusion, the success of SME boards hinges on the people involved and the structures in place to support them. By focusing on the right people, clear roles, and effective processes, boards can truly make a difference in the trajectory of their companies. Remember, it's all about people, process, and purpose.