MIKE FROMMELT, STRATEGIC TALENT PARTNERS – SEPTEMBER 2024
Most people would agree that an effective Board of Directors can provide a great boost to the growth of an ESOP company. But what is an effective Board, or more specifically, what makes for a great ESOP Board Director?
3 Keys for Your ESOP Board Director
Through my experience with many ESOPs, I believe there are 3 key components to identifying the most effective Board Directors for your ESOP.
- C-Level leadership experience in another company that has gone through moderate to significant growth. They should ideally be working in, or have worked in, a company larger than your own. The idea here is that they know what it takes to “go where you want to go”.
- Cultural fit. While this often gets translated into “prior ESOP experience”, I have found that leaders from other types of ownership structures can make great Board Directors for ESOPs. However, it is critically important the Director is an individual who appreciates employee ownership and has a proven track record of being a people focused leader – one who doesn’t make all decisions based upon quarterly financial results.
- A specific set of experiences or skillsets that tie into the company’s strategic plan and long-term vision. This could be specific industry experience or functional experience, but their experience should provide value to one or more of the ESOPs specific goals.
This 3rd component is the one I see most often missed, ignored, or maybe even misunderstood by ESOPs. Many will simply bring retired (or active) ESOP CEOs or CFOs to their Board, assuming these folks will be great Directors. Please don’t misunderstand, I’m not suggesting ESOP CEOs/CFOs don’t make great Directors. Most of them make great Directors, and they’re great people. However, I’ve found that Directors who provide the greatest value to an ESOP are those who bring specific skills or background that relate directly to the strategic plan.
Examples of Value in an ESOP Board Director
Here are a couple examples:
Recently, I conducted an ESOP Board Director search for an ESOP selling their products into a very new and burgeoning market. We intentionally hired a Director from this industry who will help them better understand the key players and the overall landscape of this market. And yes, we absolutely found a Director who is appreciative of the ESOP culture and has broad leadership experience in growing companies.
Another search was for a Director with a specific background in Information Technology and Digital Transformation. Again, we made sure to identify someone who appreciates employee ownership and is leading in a growing company, but she is a CIO (Chief Information Officer) in a larger company. The Director will help guide this ESOP through some significant technical challenges (and opportunities) for the business.
To sum up, don’t sell yourself short. There are exceptional ESOP Board Director candidates out there who can bring all three of these components. It certainly takes a little more planning and effort to identify them, but the return will be well worth it.
