You’ve probably heard the phrase “due diligence” thrown around various business situations in your time. It’s one of those pieces of jargon that nobody perfectly understands, and everybody jams into discussions when they mean something else entirely. So what does it actually mean?
Due diligence is just another way of talking about research, but in a way that protects you from failure. If you’ve done your due diligence, you’ve studied and prepared for a task to the point where if something does go wrong, it was completely out of your control.
One of the earliest and most important times a new chairperson might need to conduct due diligence is when selecting the members of their board - so let’s do a deep dive into what that looks like.
Understanding risk is probably the most important part of conducting business as a whole, and performing your due diligence on a particular area allows you the deepest possible understanding of those risks.
When building a board, two of the most important types of risk to consider are Performance risks and Reputational risks.
Having a board that’s able to work in efficient, professional harmony is the dream of any organisation, and sometimes it’s just not possible. This state is born out of a balancing act, where the personalities, work ethics, and outside lives of the whole board need to come together perfectly and never change - and to be honest, that doesn’t happen.
It is therefore the job of the person putting this board together to find people who can mitigate the risks associated with a dysfunctional team. If they have a mutual respect, can contribute meaningfully to discussions, and execute their tasks effectively, then they are low-risk.
Character references and examples of their previous board work are good ways to research (or perform your due diligence on) how a candidate is likely to perform for your board.
Becoming a board member means becoming a public-facing representative of that organisation. Understanding a candidate’s history can be important to ensure the company isn’t blindsided by any PR or legal issues that would require extra time and resources to solve.
Now this doesn’t have to be invasive. As a chairperson, you do need to show a degree of trust in the people you’re selecting. There’s no need to dive through their social media or call their ex-boyfriends - that’s where due diligence becomes a breach of privacy. Just talk, and ask if there’s anything that you need to know about them that could affect the organisation’s future.
Ensure they’re fully engaged with the organisation’s mission and direction through discussion, and if it all checks out and there’s no red flags, give them a shot.
Conducting due diligence can be a long and tiring process. It takes skill and dedication to complete effectively, and you might need some practice to get it right. This is where having the right board can save you: sharing the workload is vital to the effective running of any organisation.
Put in that extra effort to find just the right board for you, and in the long run, it’ll pay off in spades.