Board Leadership, a Wiley Periodicals LLC publication, published this article by John M. Collard, a turnaround manager and outside director. In this article we discuss the ins and outs of bringing in outside directors to help guide decision-making and bring fresh perspectives.
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Article-of-Interest Summary:
Hiring Outside Directors When Private Companies Don't Have To: They Bring Change
By John M. Collard
You need these guys … to increase cash flow, provide valuable guidance, contacts, and credibility.
Companies committed to going through significant business change (restart, turnaround, transition, generational ownership transfer), anticipating a major liquidity event, need guidance.
Why Add Outsiders to Your Board of Directors or Advisors?
- Outside directors often increase cash flow and business growth. According to a Forbes/Lodestone Global survey; 97% of companies reported increased revenues and EBITDA, since adding a board with outside directors.
- Outside directors can be a low-risk, low-cost resource. They bring a new set of skills and ideas to produce benefits, while you maintain control.
- Outside directors provide an external source of accountability.
- Outside directors are on your side. These advisors answer only to you.
- Outside directors add credibility. When it comes time for a liquidity seeking event, outside directors send the message that you are an organization with leadership and guidance.
- Outside directors bring an independent perspective, develop strategic thinking and planning, utilize their experience and objectivity, provide their contacts Rolodex, find capital to finance the company, and guide transaction activity. Many of these benefits are absent in companies, so the outside influence should be used to your benefit. Remember, the key is for the CEO and management team to listen to the advice given and factor these inputs into their thinking, then make decisions.
Benefits of Outside Directors
| Action/Skill | Benefit |
| Independent perspective
Unbiased advice | Challenge management
Sounding board for CEO
Objective, Mediate conflicts |
| Strategic thinking and
planning | New directions, Transitions
Incentive-based compensation |
| Experience and objectivity
New knowledge | Been there, done that
Oversee performance and risk
Accountability, Credibility |
| Contacts
Networks | Investors, Lenders, Resources
Partners, Customers, Suppliers |
| Capital infusion | Raise Money, Restructure
Guide offering process
Find capital |
| Transactions | Prepare company for sale
Locate interested parties
Negotiate a deal |
Create a culture and structure that will withstand third-party accountability to add value to your business. Start thinking as a serious, growing company and prepare for future life as a public company or for increased scrutiny of investors.
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About the Author: John M. Collard
John is Chairman of Strategic Management Partners, Inc. (410-263-9100, www.StrategicMgtPartners.com ) in Annapolis, Maryland. John is a Certified Turnaround Professional (CTP), and a Certified International Turnaround Manager (CITM), who brings over 35 years senior operating leadership, $85M+ asset and investment recovery, 45+ transactions worth $1.2B, new business developed $950M+ and win ratio 3.5 of 5.0, and $80M fund management expertise to run troubled companies, serve on and advise company boards of directors, and raise capital. John has served as CEO, CRO, Receiver, senior executive to turn around troubled entities, and serves as an outside director. John is enshrined in Turnaround Management, Restructuring, and Distressed Investing Industry Hall of Fame. John is Past Chairman of the Turnaround Management Association (TMA), Past Chairman of the Association of Interim Executives (AIE), and a Senior Fellow of the Turnaround Management Society. John is a co-Founder of TMA. John is Prince George's Business Leader of the Year. John is honored with the Interim Management Lifetime Achievement Award from the Association of Interim Executives. John is honored as Most Admired CEO in Maryland by Daily Record. John is honored with SmartCEO Distinguished Leadership Award.
About the Firm:
Strategic Management Partners, Inc. (www.StrategicMgtPartners.com 410-263-9100) is a turnaround management firm specializing in interim management and executive CEO leadership, asset and investment recovery, board and private equity advisory, raising money, and investing in and rebuilding underperforming distressed troubled companies. The firm has been advisor to Presidents Bush (41 & 43), Clinton, Reagan, and Yeltsin, World Bank, EBRD, Company Boards, and Equity Capital Investors on leadership, rebuilding troubled companies, investment recovery, turnaround management and equity investing. SMP is celebrating 25+ years of service to its clients. SMP was named Maryland's Small Business of the Year, and received the Governor's Citation, Governor Martin J. O'Malley, The State of Maryland as a special tribute to honor work in the areas of turning around troubled companies and saving jobs in Maryland. Turnarounds & Workouts Magazine has twice named SMP among the 'Top Outstanding Turnaround Management Firms'. American Business Journals named SMP among the Most Active Turnaround Management and Consulting Firms in Baltimore, Washington, and the Mid-Atlantic Region. Global M&A Network Turnaround Atlas Awards named SMP as Boutique Turnaround Consulting Firm of the Year.
Strategic Management Partners, Inc.: turnaround managers ready to run troubled companies, recover assets from investments gone bad, advise boards of directors and investors on company viability in distressed situations. We provide strong interim and operational leadership, strategic planning, financial, defense conversion, sales and marketing acumen developed building organizations in large and small companies, including President of public & private middle-market companies providing solutions to Commercial, Federal Government, International markets. Enterprises range from start-up to $100+mil. Industry expertise: Manufacturing; Job Shop; Engineering Services; Computer Processing/Services/Software/Integration; Communications; Defense Electronics; Aerospace; Federal Government Contracting; Systems Integration; High-Tech; Finance; Marine Services; Real Estate Development; Construction; Fabrication; and Printing.
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Reference:
www.StrategicMgtPartners.com Turnaround Managers
www.StrategistLibrary.com or www.StrategicMgtPartners.com/library/libindx.html
Hiring Outside Directors When Private Companies Don't Have To Published by Board Leadership, a Wiley Periodicals publication.
Hiring Outside Directors When Private Companies Don't Have To Published by Board Leadership, a Wiley Periodicals publication at their site.
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Raising Money Capital Published by Chief Executive Magazine
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Managing Turnarounds Phases and Actions Published by RMA Journal
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John M. Collard on Twitter at http://twitter.com/JohnCollard
Collard on NewsReleaseWire
Firm:
www.StrategicMgtPartners.com Turnaround Management Experts
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