Big fish, little pond
By David J. Malizia

BOARD LEVERAGE Big fish, litde pond How large-company execs best fit into smaller businesses and their boardrooms. BY DAVID J. MALIZIA I N MY 20 YEARS in business I have worked for. interacted with, and assessed many CEOs and manag- ers in dozens of companies across a range of industries — large and small, public and private. Much of my energy over the years has been focused on mak- ing investments and building manage- ment teams in small companies with revenues under $20 million. In these experiences, I have frequently participated in the selection of CEOs and developed some contrarian views on the topic. Conven- tional wisdom says that if you need to build a management team or hire a CEO, then you should look to hire managers who run Fortune 1000 com- panies. After all, if a person can successfully manage one of the world's largest corpo- rations, then they should be able to lead a small business. However, in contrast to that conventional wisdom, I argue that the opposite is true: Ex- ecutives of large organizations may not be the best stewards of small companies, but they can be excellent advisers and an invaluable resource. David J. MalJzia is a founder and managing partner of Westshore Capital Partners, a private equity firm (www. westshorecapital- He has served on the boards of several private and publicly held companies. So, here are my top-five tips in devel- oping a board and a strong management team for a small business: 1. Look for Leaders Who Can "Roll Up Their Sleeves" to Run Your Small Compa- ny— Instead of recruiting an executive accustomed to running a large compa- ny, focus your efforts on someone with hands-on experience, an entrepreneurial bent, and the ability to relate to anyone, no matter their education, background, or position. Executives of large and medium-sized organizations tend to be good at delegat- ing rather than doing. Small-company environments tend to be dynamic and require a hands-on approach to doing the work, as well as quick, impromptu decisions. In these smaller organiza- tions, successful leaders must wear a lot of hats and lead through motivation and example, not by power, posi- tion, or pedigree. 2. Fortune 1000 CEOs and Executives Belong on Your Board—Even though many executives of large and me- dium-sized businesses would make poor small-company managers, they can be an in- valuable resource to the board ofa small business. Senior- level executives with large- company backgrounds pos- sess an innate ability to apply more thorough processes and structure, which is needed in a small company as it begins to grow and mature. As advisers to your team, these board members can help successfully engineer your company and help navigate through strategic, operational, and human resource land- mines. They know what infrastructure and metrics are needed to manage those businesses. Their experience can help the small-company CEO mature and possibly make the leap to large-compa- ny CEO. But be careful when appointing seasoned veterans to your board. Just as with all relationships, respect and com- patibility are important in building a productive board. 3. Don't Limit Yourself to Current and Former CEOs to Fill Board Positions — Many companies would consider land- ing a Fortune 1000 CEO to be a trophy catch. However, there's more to consider than pedigree when it comes to choos- ing the right executive for your board. In fact, in many instances, CEOs may not be the best option. Let's face it: CEOs are busy. While ap- pointing a well-known exec to your team is enticing (even glamorous), you'll stand to gain more by selecting professionals who will directly and significantly im- pact your organization. Consider other senior-level executives, such as CFOs, COOs, and CIOs. These individuals often have valuable business savvy and exper- tise, and —• honored to sit on your board — they may bring more enthusiasm and dedication to their role than a CEO. 4. Use Your Board to Address Weak Spots — Life is about networking and leveraging relationships. Every company has expertise gaps, and nobody knows your shortcomings better than you. Use the leverage and networking capability of executives on your board to assess the managerial positions in your company and to develop the correct job descrip- tion and criteria to ensure you will hire the best employees. People are expensive, and you cannot afford to make the wrong hire. Seasoned executives have made the hiring mistakes and they have various tools and meth- ods that can be useful in hiring the right personnel. Leverage their experience and knowledge. You will be grateful! 5. Communicate, and Be Open with Your Board— If you are serious about having an effective board that can con- tribute to building a successful compa- ny, you have to communicate with your board members on a regular basis and be completely open with them about your company. Too many small-busi- ness owners want to have boards, but they continue to be guarded with infor- mation about their company and restrict access to their employees. This guarded approach will only create an uninformed Continued on page 27 24 DIRECTORS ft BOARDS back to the profound impact Confucius had on their culture and the emphasis placed on obedience and order. Chinese businessmen enter a room in the order of their rank and they expect coun- terparts to do the same, allowing both groups to immediately understand each other's hierarchy. Only a leader speaks during meetings, and the Chinese ex- pect that the opposing delegation also will have only one speaker — a condi- tion that most individualistic Westerners find difficult to follow. • The author can be contacted attrevis@norel- QUIDDITIES Alignment strikes out Continued from page 8 was due not to Casey's managerial skills but to the Forbes Field groundskeepers. (Absent the pebble, the Yankees would surely have won, despite Casey's wrong- headed pitching rotation.) Joe Torre should be admired for refus- ing to participate in a misguided exercise in "alignment." It is past time for Cor- porate America to stop swinging at this same screwball. • The author can be contacted at hkaback® BOARD LEVERAGE Big fish, little pond Continued from page 24 board that will eventually wither away and become disengaged. Allow total access to information, fi- nanciai statements, compensation, strat- egy, and personnel. This openness will produce a vibrant board whose members will feel that their efforts are for a good purpose — thus, keeping them engaged, helping your company mature, and pro- fessionalizing the organization. • The author can be contacted at DJM@Wests- rmTrcial disclosure: This program could ^ protect your compari and your reputation.* CORPORATE DIRECTORS' RESPONSIBILITY: ENHANCING THE INTEGRITY OF FINANCIAL DISCLOSURE MARCH 10-12 OR SEPTEMBER 8-10, 2008. As a corporate director your responsibility has never been greater. This unique 3-day program, accredited by Institutional Shareholder Services and supported by the New York Stock Exchange Foundation, Inc., will focus directly and comprehensively on the critical issues of financial disclosure. The expertise, analytical skills, and confidence you will gain will contribute to protect your company's future, and your own. To learn more, go to WWW.GSB.COLUMBIA.EDU/EXECED or call us at 212.854.3395. Columbia Business School EXECUTIVE EDUCATION FIRST QUARTER 2008 27

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