What Owners Need to Know about Boards of Advisors and Directors – Colleen McCracken

Would a Board of Advisors or a Board of Directors help jumpstart your company? If so, which is right for your business, how do you find the right people to sit on your board, and do you need to compensate them? We’ll tackle all of these questions and more with Colleen McCracken.

Rich Brooks: Our guest today is a strategic business advisor with over 33 years of successful business and senior leadership experience in non-family owned and family owned businesses. She has held numerous positions in finance, operations, and senior leadership throughout her career with large multinational companies including, WR Grace and GH Bass.

Prior to joining Planet Dog – a designer and retailer of premium dog products – as its CEO in 2013, she was the CEO and CFO of Thomas Mosier Cabinet Makers, a manufacturer and retailer of premium handcrafted American furniture.

She helps her clients in the development of strategic plans and business plans, building financial models that help leaders better understand the financial performance, their businesses, leadership develop and succession executive coaching, and in governance, helping companies build and develop strong boards.

A strong advocate for education, she serves as the Vice Chair of the board for Junior Achievement in Maine, and has been an adjunct professor at UNE, and often guest lectures on leadership, entrepreneurship, as well as many other business topics. We’re very excited today to chat about setting up a board of directors or board of advisors for your company with Colleen McCracken. Colleen, welcome to the podcast.

Colleen McCracken: Hi Rich. Hi, Yury. Thank you so much for having me. I look forward to the conversation.

Yury Nabokov: Fantastic. Well, let’s dive right into it today. Today we’re chatting about the role boards of advisors and boards of directors play in growing business. So what is your experience in these two areas?

Colleen McCracken: Great question, Yury. So I think I come at it from many different perspectives. I have obviously participated in many boards myself, certainly in the non-profit world. I’ve been on the board for the Institute for Family Owned Business, I’ve been on some school boards, and I’ve also been on the board for Junior Achievement of Maine, as Rich just mentioned. So I’ve participated as a board member.

I also was very instrumental in establishing the board of advisors at Thomas Moser Cabinet Makers. We had a very strong board and the board was just getting started. So I was very involved in that process. And today I work with a lot of clients on setting up boards. There’s a lot of companies that are at a point in their trajectory where they’re really looking for that outside perspective, so I help them create boards.

I also work with some companies on improving the boards that they already have, the performance of those boards. I have a client right now that I’m working with who has three boards for three separate parts of their enterprise. Managing one board is difficult, managing three is absolutely difficult. So I’m working with them on sort of helping them consolidate that board. And I also work on helping companies grow and develop into a board of directors from a board of advisors. So lots of different perspectives there. And I’ve seen a lot of things work really well, a lot of things that probably could have been done better. So I’m happy to share some of those, I guess we’d call them war stories, with you as we go through this conversation.

Rich Brooks: Well, I am super excited about today’s conversation, as a business owner who has not yet had a board of advisors or directors, but I’ve been asked to be on other company’s boards. So let’s start off with some basic questions. What is the difference between a board of advisors versus a board of directors?

Colleen McCracken: Great question. So a board of advisors is typically where a company might start, so there is no fiduciary role. And by that “fiduciary role”, I mean that you are accountable as a board to the, whatever it is that you’re working on.

So if you’re giving advice and that advice is taken and it doesn’t help the company, then you can be held liable. Well, personally, as a fiduciary. So a board of advisors does not have a fiduciary role, and typically a company will start with a board of advisors and it can be any size. You can have a board of advisors that has three board members, or you could have a board of advisors that has 15 board members. As an aside, typically an odd number for a board is appropriate, and that’s because of obviously voting and sometimes there’s someone who’s got to break that tie, and having an odd number of board members helps with that to some degree.

So those are the typical types. You also have family boards. So you might have a family owned business that starts with a board that’s just family members and it may stay that way. Maybe a retiring owner, first-generation owner can be on the board, but not necessarily operating the business. So those are the three types of boards for the most part.

Yury Nabokov: And as a business owner, how do I know if I’m ready for a board, and which one would be appropriate based on the maturity of my business or maybe depending on the industry that I’m in?

Colleen McCracken: Great question. So, it’s different for everyone. I think there’s a couple of things that have to be in place. First, you have to have monthly financials, as an example. You have to have some processes in place that are delivering data and information, because those are things that a board is going to need to have.

So if you’re just getting started out and these things are sort of not in place, you’re really developing your leadership team, you’re too busy starting the business and running the business to really focus on getting a board right place. Then I would say the timing is not right.

But if you’re a business that has those things in place, and a lot of business owners and CEOs are struggling with where do I take the company. You know, am I going to grow it? Am I going to stay in the channels that I’m in? And that’s when a board can really, really be helpful.

And in the case of family businesses, they can also be helpful for dealing with any type of succession issues you might have. But I would say if you’ve got the infrastructure in place with sort of your business processes and your operations and your financial information, any company can benefit from a board. They just bring a different perspective that we often don’t see inside our four walls.

Rich Brooks: So once I’ve decided that I’m ready, that it’s time to bring on a board – whatever the point is in my business – but I’m ready to do this. What are the first steps? Should I start with what my objectives are for the business, or should I first choose a team of advisors?

Colleen McCracken: Excellent question, Rich. And I would tell you that the first thing you should do is have a very serious conversation with yourself as the CEO and owner and say, where are my challenges as a business. Am I struggling with growth? I’m really looking to grow the company, but I can’t grow the company. Am I struggling with getting to the point in my career where I’m thinking about moving on to something else, or I’m thinking about retiring, or I’m thinking about turning the business over to my sons, or whatever that may be. It really comes down to the business owner or the CEO of that business. What are the challenges that business faces and what does that CEO really want out of a board?

And often times what I see is people go get board members, they go get friends, they go get people they know. And before you know it, they realize that those are not the skillsets that they need for their board, because those don’t line up with the challenges that they face, the CEO or a business owner. So the first thing is absolutely sitting down and saying, where are our strengths, where are our weaknesses, and where do we need help as we grow and develop this company? And I think that’s where you start. That’s the first step.

And oftentimes that’s not easy for a CEO or business owner to do right by themselves. Oftentimes and I will say that accountants and attorneys, most businesses have those resources already at their fingertips. Those are good places to start in terms of having the conversation about where am I at, what do you see as some of our business challenges. Because they know your business pretty well. And, do you think I’m ready for a board? Is that something that you think could really benefit our organization?

So I think, having that conversation initially with that small group, and sometimes those individuals may end up being on the first board. I often see boards of advisors start with an accountant and their lawyer – a company’s lawyer – and grow from there. And oftentimes those two individuals will stay on for an extended period of time because they do have a lot of background information about the company and they do often know some of the challenges that you face. But I think those are the places to stop. And then from there you start to build sort of the framework for how you develop that board and recruit board members.

Yury Nabokov: Colleen, you mentioned a couple of roles or Individuals with a specific skill set that you would like to see or suggest to be a part of the first iteration of that board of advisors or directors. Are there any particular skills that also should be present there besides the legal and the financial acumen?

Colleen McCracken: Well, so for example when I was at Moser, one of the things we really wanted to do was make sure that we had a strong sales and marketing person in B2C. So direct to consumer sales was really our niche area. And we really wanted to have someone who had extensive experience in building a brand within the direct to consumer market. And so for us, that was one of our first choices, was trying to pull someone onto the board that represents that specific niche that we really wanted to expand within.

And so that’s an example of where it really does come down to the specifics of the business. If you want to acquire another company, then I would highly recommend that you consider having someone on your board who has experience with M & A work, someone who knows the process for buying and selling, or someone who knows the process for finding companies that sort of are the types of companies that should think about merging down the line. So it really does come down to those very specific goals. And often that process is the process that gets overlooked. You know, here’s really what I care about, this is what I want my board to be able to help me with. You can’t spend enough time on that, in my opinion. That’s the area where I think a lot of companies sort of end up with a board that maybe isn’t meeting the needs that they have.

Yury Nabokov: I think moving forward the other critical area that may be very underutilized, at least right now, is going to be developing the resilient business and digital transformation. A lot of guests on Fast Forward Maine Podcast talked about developing resiliency and being modern or digital first, or have digital capabilities that a lot of us realize that in our markets are in a way lacking, unfortunately. But I think that’s going to be another big priority item for individuals considering the boards or the advisors.

Colleen McCracken: Totally agree. And I think also thinking about the evolution of the consumer. So I mean, we know that there’s strong differences between buying behaviors, as an example, with the millennial generation versus the baby boomer generation. And I think a lot of companies are in that mode of having to transition sort of their thinking about how to attract those customers. Um, because they, they just, they do it in different ways.

I mean, as an example, I’m working with a client right now that, um, you know, has always been in a situation where customers call and place an order for product. I mean, that’s just how it’s done. And, but that is not right now, you know, the, the younger generations shop. And so they’re really having to treat transform the way in which they see their business and present their business to the outside world. And technology is a huge part of that.

So you’re right. Those are some areas where, as you think strategically, where am I going. And therefore, if I know that I’m weak on the digital side of attracting consumers to my business, I need to make sure I’ve got someone on my board that can help me with that down the line. Absolutely.

Yury Nabokov: So if we have this person on the board, should we expect this individual to operate as a consultant? Or is it someone that can just help me to frame the direction or maybe simply ask the questions that I have not considered as the business owner?

Colleen McCracken: It’s a great question because there is this sort of line between being a consultant and being a board member. And oftentimes there’s a conflict of interest if you’re trying to do both. So a board member is really asking the right questions, guiding and directing. But not necessarily down in the details around giving you specific advice about specific things there. Perspectives are more broad.

And remember, typically when you’re in a board meeting, you’ve got business people around the table that are sort of all weighing in on a topic, right? So if we’re talking about expanding, this person may have more experience in digital, but this person over here may have more experience in consumer buying behaviors, as an example. So they’re always sort of working together.

Another sort of benefit of having a board is the sort of synergy that happens between board members and developing that understanding of your business. But predominantly their advice happens at board meetings and their feedback happens at board meetings. And it is more things like; “Have you thought about this?” “Have you put together an analysis of this?” “When you did this, what did it tell you?” So they ask a lot of questions and they will all often say, “When I did this at my company, this is sort of how it worked and how it happened.” So they’re not really down in the nitty gritty, like a consultant would be, but they are very, very involved.

The other thing I would say is, a strong piece for maintaining great relationships with companies and boards is not just at a board meeting. As the CEO, you have to often converse with board members outside of board meetings. And that happens a lot on the boards I’m on now. I get calls in between board meetings all the time about, “Hey, we’re thinking about putting a committee together for them. What do you think?”  So I do get a lot of that kind of the relationship that you build with board members is very, very important because you are supporting each other.

So, making sure that it isn’t just the feedback at the board meetings. You want those board members to learn as much about your business as you can, because then they’re going to give you the best advice. But it is very different than a consulting role.

Rich Brooks: I feel almost like it’s that mystical council of elders that gives you slightly cryptic responses to send you on your own personal journey rather than, here’s the how to.

Colleen McCracken: Yeah. Really good point, Rich. And they sometimes will say, “Have you thought about hiring a consultant?” So you’re right. That’s exactly right.

Rich Brooks: Uh, I’m thinking about this, Colleen, I’m thinking about all the business coaches, mentors, counselors I have had over the years. What should I expect to pay my board members? Or is this more like a mentoring situation where people join boards out of the goodness of their hearts?

Colleen McCracken: So the old adage, “You get what you pay for”, is sort of true. I mean, I hate to say it, but there’s really great people on volunteer boards, so don’t get me wrong. I happened to be one of them.

Rich Brooks: Oh, so you’re on my shortlist then.

Colleen McCracken: So you know, I think when you are asked to serve on a board, let’s talk about board of advisors initially.

Rich Brooks: Most of our listeners is probably going to start there anyways. So that makes sense.

Colleen McCracken: Yeah, absolutely. So, you know, I mean, there’s a whole world of professional boards. There are people that just serve on boards as their profession. So that tends to be more the publicly traded side of things.

Yury Nabokov: Is there a PhD and being a board member?

Colleen McCracken: You know, they’ve got years and years of experience and they just, they can make enough money on boards, that’s a good career move to some degree. But on the board of advisors side, I’ve seen everything. I mean, at Moser we had paid board members. I think most of what I see are paid board members and they’re typically paid by meeting. So you’re not paying when you call them in between meetings. They’re not getting paid for that, but they are getting paid for every board meeting they attend. And it’s hard to say the range because I really think it depends on the size of the business. Larger businesses, obviously their board members are earning higher board fees.

Rich Brooks: Can you give us a range? I don’t want to put you on the spot, but just for people who are listening, a small company – which is most of Maine – 10 or less employees versus maybe a company that’s 50 or more employees, what’s a ballpark that we should be thinking of per board member, per meeting? And I’m guessing quarterly meetings, maybe?

Colleen McCracken: Yeah, mostly quarterly. Sometimes the board will meet monthly when they’re first getting started, just to get, you know, just to get them up to speed. But typically quarterly. I would say a minimum for a small company, somewhere between $500 and $1,000 per board meeting, per board member.

I would say that when you start getting into some medium-sized type companies, you’re probably looking at $1,500 to $2,000 per board meeting, per member. So I think it really, really depends. I mean, sometimes it has a lot to do with how often you’re meeting. So some companies want to meet monthly and if that’s okay, that’s the case, then obviously that fee might be a little bit less. But that’s kind of the range that I’ve seen.

And then obviously when you get into the board of directors side of things, it’s much more. I mean I’ve seen some boards of directors pay a board member $5,000 to $10,000 per meeting. So that’s sort of the varying size of what that can look like.

Yury Nabokov: Colleen, this is exciting. This is very interesting, the price range. But as a business owner, how can I put a kind of a KPI or some kind of metric to say that, okay, I’m paying these guys X, Y, and Z, what am I getting in return? Like, I’m being asked, I’m getting all these questions, but what’s the outcome of this question?

Colleen McCracken: What’s the ROI, right? Yes, absolutely. You know, I’m a firm believer – and we can talk about this a little bit, too – is that board members need to provide the expertise that the business owner is looking for. I believe in doing board reviews, I believe in doing board assessments, and that’s done by a group of people.

I believe that when you set up a board, there has to be very clear expectations of what you expect. Um, because if you don’t. There will be, you know, there’ll be questions about, well, I didn’t know, that’s what you expected of me. There needs to be very clear expectations.

And the other thing is every board is different around what they’re looking for in a board member. I think the larger the company and the more sophisticated the company is, I would say the board is probably more involved with long-term strategic planning, that type of work. Whereas a smaller company with a smaller organization is probably looking for, you know, that area where you are talking about some type of operational support, um, while also looking at sort of forward looking, looking types of things like strategic planning, but more.

You know, I’ve seen boards that are involved in hiring and firing situations. I’ve seen boards that are involved in compensation. Actually, a lot of boards are involved with developing compensation. So expectations have to be set and then evaluations need to be done, Yury, to make sure that board members are meeting those expectations.

I also believe in term limits, setting a term limit. And maybe you start with a year initially just because you want to make sure everybody’s onboarding and really providing what you’re expecting. And then typically you’ll see 2-3 year term commitments after that. So early on really setting that expectation up front and then measuring that performance and making sure that works is a very important part of the beginning process.

Yury Nabokov: Awesome. I appreciate that. You mentioned the word ‘expectations’ several times, and I want to have a kind of understanding about the expectations for running a board meeting. What does it look like? How often should we hold them and how do I, as the business owner, should prep for one so they can have a successful meeting?

Colleen McCracken: Great question. Because I do think this is sometimes where things can go awry. As I said earlier, you’ve got to have some of the business processes in place. You have to have metrics. You talked about KPIs, you’ve got to have performance to plan, you’ve got to have performance to last year. You have to know how your sales channel is doing. If you have different types of sales activities, how am I doing to plan? How am I doing compared to last year? There’s a fundamental level of information sharing that has to happen in order for a board to be able to be successful. So I think that making sure that those things are in place is important.

So your board meeting, there’s a typical agenda for a board meeting, believe it or not. I’ve seen in my experience that we have a set agenda, but we often vary off it. Because the minute you start, there’s always things on your agenda that are more important than others. I would say that initially as a board’s getting acquainted, they’re going to spend more time understanding the existing business as it is today. So you’re going to be spending more time talking about how are you doing on your financials, how are you doing on your sales goals, how are you doing on recruiting the people. If you’re growing those types of basic things, and then as time goes on, you’ll move into more strategic type things. And that is the goal. So what you don’t want to do is be in a situation where now everyone’s sort of up to speed on the basic stuff that you cover in a board meeting, for example, review of financials, operational performance updates from the last board meeting, that kind of stuff.

You got to get through that quickly because you really want to get to the stuff that you really want to use them for, for that meeting. Like, “We’ve been researching this new business opportunity and we want to get your feedback on A, B, C.”  What you don’t want to do is end up getting to the end of the meeting and you have no time to even talk about that. And board members are not staying late if you’ve got a three hour board meeting, I mean, I’m being a little facetious. They might stay a few minutes late, but you’re not going to get a board to come for a three hour meeting. And typically board meetings, by the way, will run a minimum of two hours to sometimes half a day, sometimes even longer.

I personally think half a day is – and remember this is quarterly – so if you’re meeting more frequently, maybe two hours is more appropriate. I would say four hours at the most, people start to really… we had half day meetings at Moser and people started to sort of have a hard time concentrating and staying on track by the end.

Rich Brooks: Luckily, their chairs are so comfortable there. It probably made it easier.

Colleen McCracken:  So we made sure that they weren’t comfortable because we didn’t want them falling asleep, so they didn’t have comfy chairs. But I think that’s kind of it so that there is a format for the meeting. It’s kind of reviewing sort of where we’ve been since the last time we met, key KPIs or performance metrics, and then what are the things that we really want to talk about. And oftentimes the chair of the board and the CEO and or founder are developing those new things.

Before the board meeting, board meeting materials go out a week in advance. So one of your biggest expectations is they come to a meeting prepared, they know your numbers, they know what to ask. So you’re not sitting there with your CFO having to review performance because they’ve really gone through that already. So this is sort of a path of getting really good at board meetings. They do start out a little clumpy at first. I’m not going to lie. Everyone has to sort of get used to that process, but yeah.

Rich Brooks: This has been a great conversation and kind of like, just to flip this around a little bit at the end, you’ve talked about people who are professional board members. It sounds like it’s something that can also be very rewarding. If somebody has been doing business for a while and is interested actually to be considered to be on a board, either a board of advisors or a board of directors, what advice would you give to them?

Colleen McCracken: I think that is really a networking thing. So through networking is where you find out where there’s an opportunity to be on a board. I will say that oftentimes you will see board positions posted on LinkedIn sometimes. And you know, banks are notorious for getting out needs for board members. But it does tend to be a networking thing.

If I’m looking to get on a board, I let certain people know that I’m interested in being on a board. And next thing you know, you’re getting calls to be on a board. So it really is being connected with the business community, being connected with – I call it sort of the B2B network – which is sort of the banks and the accounting firms and those types of organizations, the law firms. They often know when clients are looking for board members, so I think it’s really a networking way in which that it happens. And sometimes they’re posted, but not often.

And for example that family owned business community, there’ll be a lot of people that will know when companies are looking for board members and things like that.

Yury Nabokov: Awesome. Well, Colleen, we are almost at the very tail end of our show today. And like with all of our guests, we can continue the conversation for four hours because there is so many valuable insights to help our Maine business community to thrive and survive during this turbulent time.

So at the end of the show, we like to ask our guests one very important question that matters to us. What is one thing you would you change, if you could of course, to improve the business ecosystem here in Maine.

Colleen McCracken: So coming up with one thing was hard. But what I will say is I believe the foundation to a strong economy is education. And if we haven’t seen the challenges that we’ve had with education through COVID, then we have a long way to go, right?

So we have rural areas of Maine that have no broadband. They can’t do remote learning. There’s kids in certain parts of our state that don’t have access to technology at home, they don’t have computers. I don’t believe you can have a thriving economy without a strong education system. And sometimes in Southern Maine, we’re very spoiled because we have a lot of those things. But certainly through my work with Junior Achievement, it’s just not the same in other parts of our state.

And I think the state has the opportunity to have a system, a thriving economy everywhere within our state, but that starts with education. So we really have to get broadband across the state. We really have to make sure there is no child in this state that doesn’t have a computer at home and that has been taught how to use a computer at home. And to me, with that in place, that educational system is where we’ll get entrepreneurs moving forward.

You know, children learn and then if that is sort of alive in their community, they will become entrepreneurs. They will start their own businesses, we’ll also attract people from away. I feel sometimes that we have a great state and to offer people from away, and we’ve certainly seen through COVID, people want to buy homes here. They want to get away from areas where they now are learning that those areas are not necessarily great for raising families or whatever it is. And I think that we have the ability to attract people to our state that are smart and able to start businesses.

And I believe that our educational system needs to be in a situation. It needs to be in a state that allows for those types of things to happen. And with that, our economy will, there’s no doubt in my mind, our economy will grow. Businesses will prosper and the state of Maine will become one of those hubs for new businesses starting. So that’s sort of what I see as foundational for all of those things to happen.

Rich Brooks: Fantastic. Love that answer. Colleen, this has been great. Now I know you help businesses find and attract boards of advisors and boards of directors. So if somebody is kind of curious about learning a little bit more about how you might work with them or what kind of work you do, where can we send them online?

Colleen McCracken: I would definitely say to reach out to me on LinkedIn, it’s Colleen L. McCracken. I’m on LinkedIn and easy to find me there. And certainly shoot me a note there. I would also say that you can reach me on email as well. It’s [email protected].

Rich Brooks: And we’ll make sure all of that is in the show notes for those of you driving and unable to write that down at this time. Colleen, thanks so much, this has really been eye opening and a great resource.

Colleen McCracken: Well, thank you very much for the work that you guys do. I think it’s great. And I think it gives great business advice to business leaders in Maine.

Yury Nabokov: Fantastic. Thank you for coming.

Colleen McCracken: All right. Thank you.

Rich Brooks: That was some great content from Colleen. Yury and I were just discussing it after the interview. Very excited about all the stuff that you shared with us and maybe where we want to take our own businesses and futures.

But if you liked this interview, if you thought Colleen provided a lot of value and you want to reach out to her, or you want to read parts of the interview again, you can do all that at our website, fastforwardmaine.com/63. Colleen’s contact information is there too, if you want to reach out to her about your own board needs.

But this is the part of the show where Yury and I recap our ‘fast takes’ from what we took away from today’s interview. So Yury, what’s your ‘fast take’?

Yury Nabokov: I really liked the part where she said that you get what you pay for, and it doesn’t have to be finances in terms of your board of advisors or word of directors. It’s the amount of time and energy that you put into educating the members of your board. So make sure that you understand your business and make sure that they understand your business as well as you do, otherwise you’re going to get very mediocre results. And make sure that you actually have goals that you wish to achieve with the help of your board.

That was a ‘fast take’ from me, Rich. But I’m eager to hear what you have. What is your ‘fast take’?

Rich Brooks: Well, as a company owner, as president, I was very excited and energized by today’s conversation. Definitely got me thinking. One of my ’fast takes’ is that assembling a board really depends on your business and objectives. And probably every board would benefit from somebody with a financial background and a legal background. But yeah, understand where you’re going and where you want to end up, because that might cause you to bring in people who are specialists or experts in a certain area that wouldn’t work on another board. So it really, the board has to be a reflection of what your business goals are.