They must understand their duties and responsibilities for the business to be effective. There is a school of thought that believes the business should run the directors and not the other way round.
An effective business requires people working in the business not just on it.
The majority of small businesses do not work - plain and simple. Over eighty percent of small businesses fail within the first three years.
Most small businesses are run by owner-managers who bear all the hallmarks of victims. They will complain about overheads, staff, etc. and their businesses will never achieve their potential because they are always working in the business and not on it.
The key to avoiding this state of affairs is the recognition that a business needs to be run and managed ?things need to be planned and designed, they just don't happen.
It is essential for people to spend more time working on the business and not in the business. This is the magic formula for enabling you to run the business and not have the business run you.
So the question then begs should one be a director or manager?
Many small business directors are given the title as a matter of course or because they happen to be sitting in the room at the time the company is formed.
How many directors or board directors actually know the difference between managing and directing?
The typical response is complaints about the board and the responsibilities for the business, share options and so forth. It is almost as though many people put into these roles were meant to know the job by instinct once given the role.
The bottom line is that there is no manual and many people make it up as they go along.
To define further, managers look after day to day affairs and are glorified supervisors.
Directors, on the other hand, are responsible for all aspects of the business and its future direction.
The role of the board is fundamental to the growth of the business.
In recent years, the board's duties have been clarified, with the four main areas of the board being:
Strategic thought
Formulation of policy
Managing the managers
Accountability
There are some dilemmas arise from the four roles, however.
The skills to move the business forward while keeping it under control must be demonstrated.
The board must be alert to the short term pressures while being kept informed of the broader trends and competition externally.
The board must retain an objective point of view and stand back from day to day running whilst maintaining a sufficient knowledge of what is going on.
Commercial needs of the business need to be balanced with the need to act responsibly to towards employees, its business partners and general society.
Without clarity of leadership, focus, vision and mission the business will suffer greatly.
One of the great challenges for the growing business is to appoint and run an effective board that leads the business ? working on and not in, the business.
