Rethinking the Role of Boards in Growing SMEs
Ask a founder of a growing SME whether they have a board, and the answer typically falls into one of three categories. No, because they believe it is not yet relevant. Yes, but it is largely a formality. Or a hesitant yes, because they have a loose group of advisors but no formal structure or accountability. These responses reveal a common misconception: that a board is something businesses evolve into, rather than a strategic asset they deliberately build to support growth.
This perception deserves a closer look. From my experience serving on boards across various companies, the lack of a formal board structure is one of the most consistent gaps in otherwise well-managed SMEs. This gap often limits a business’s potential by missing out on the rigorous oversight and strategic guidance that a properly constituted board can provide.
A board is not just for large corporates
Founders making decisions with significant financial, legal, or strategic implications are effectively operating at a board level—even if no official board exists. The critical question is whether those decisions are being subjected to independent scrutiny and debate, or whether they are made in isolation without external challenge.
Many founders, when preparing to seek investment or plan an exit, regret not establishing an official board earlier. This regret is not merely because investors demand formal governance structures—though they often do—but because the discipline of reporting to, and being constructively challenged by, a board fundamentally improves decision-making. Studies have shown that companies with strong governance frameworks outperform their peers by fostering greater accountability and strategic clarity (OECD, 2019).
A board versus an advisory panel
While advisory panels can be valuable in providing informal guidance, they lack the fiduciary responsibilities and formal accountability that come with a board. Advisors offer perspectives when invited but do not bear duty of care or attend regular governance meetings. This informal nature means advisory panels cannot replicate the rigor and oversight a board provides.
In contrast, even a small board with non-executive directors introduces a different dynamic. Non-executive directors have legal and ethical responsibilities to the business, attend scheduled meetings, review financials, and actively challenge the executive team. This accountability transforms conversations, elevates oversight quality, and encourages founders to prepare thoroughly, knowing their decisions will be scrutinized by independent, experienced individuals.
What a good board looks like for an SME
For most SMEs, an effective board might include the founder, one or two non-executive directors with relevant expertise, and sometimes an independent chairperson. The non-executives should bring complementary skills—whether sector-specific knowledge the founder lacks, financial or legal expertise, commercial experience at a scale the business aspires to, or the ability to ask difficult questions that internal teams might avoid.
Regular quarterly meetings with clear reporting, predefined agendas, and documented decisions instill the discipline and accountability many growing businesses lack. Importantly, establishing such a board does not require a formal boardroom or a significant budget; it requires intentionality and a commitment to good governance practices.
Research shows that SMEs with strong governance structures are more likely to attract investment, scale effectively, and achieve successful exits (Harvard Business Review, 2021). These companies treat governance not as a bureaucratic hurdle but as a strategic growth tool, reaping benefits through better decisions, stronger accountability, and improved outcomes.
In conclusion, founders should view building a board as an integral part of their growth strategy rather than a later-stage formality. Embracing governance early can transform how decisions are made, ultimately contributing to the long-term success of the business.
Source: Here
