Building, managing, and interacting with your board is one of the most critical challenges you face as a founder.
By enabling you to leverage the experience of those who have walked in your shoes before, a great board can help you accelerate your ambitions and significantly impact your business's future success.
With many years of experience being a board member in many capacities; as a founder, as a strategic investor, as a scale stage CEO, and as an independent, I have learned that there are four key elements you need to focus on to ensure a productive board:
composition
governance
content
alignment
We'll summarize these in this post, and I'll drill into them in more detail in later posts.
Composition
Think carefully about board composition.
A properly constructed board can be invaluable in providing the critical elements of scaling your business, including strategy refinement, leadership development, strategic partnerships, and capital raising. However, it's not all sweetness and light. A great board will challenge you, pull you out of your comfort zone, and force you to raise your game. Conversely, a poor board can create unnecessary distraction, generate unhelpful entropy, provide specious advice, and seriously affect your company's performance and future growth opportunities.
While you may not have control over all of the seats on your board (e.g., if you have raised venture capital or private equity or have legacy founders in place), take the time to build out the rest of the board with a talented group of experienced & credible subject matter experts (including former operators) who have great EQ, in addition to solid IQs.
Here are some factors to consider:
Ensure you have a great chair. Preferably someone with gravitas & leadership experience who can gain the trust and respect of the other board members and help forge cohesion even when conversations get difficult.
Great boards help you anticipate where the puck is going. Ensure you have seasoned operators on your board who can help fill your management team's knowledge, network, or experience gaps. Of course, each company's needs are different, so each board is unique; however, you will likely need to pull from some subset of deep industry knowledge, operational experience, technical expertise, strategic relationships, etc.
Try to strive for a complementary mix of personalities who can constructively bring different perspectives to the table. There is no room for prima donnas on a board. Boards need to be able to tackle complex and sometimes emotionally charged issues, so identify folks who will work well together even when the going gets rough.
Try to find board members who are experienced, intellectually curious, and willing to put in the time to be effective. Board seats are not vanity positions, nor are they paid annuities. They require dedication and hard work.
Try to ensure your board is as diverse as possible. Only if your board reflects the diverse makeup of your company and the diverse perspectives of your target customer base can it provide the necessary broad cross-section of insights relevant to be successful. You are not looking for an echo chamber of people like you. You are looking for a wide range of fresh insights and perspectives. The data backs this up. Companies with diverse boards tend to outperform their peers financially and achieve better business outcomes.
Treat hiring board members with the same diligence you would hire senior management talent. Develop a skills matrix and get buy-in on what attributes/skills you are looking for. Do reference checks, in particular with folks who can give you a sense of their performance on other boards. Try to probe the key issues I have raised above such as engagement, style, etc.
Governance
Effective governance is critical for an effective board; ignore this at your peril. Everything is more complicated when people do not understand or are unwilling to follow the rules.
Establish clear and concise written policies and procedures, and ensure they are always available for board members to access. Policies will include the makeup and mandates of your committees and day-day rules of engagement around critical activities such as audits, compensation for senior management, hiring, etc.
Summarize and make available the critical voting thresholds, management decision thresholds, and required signoffs that govern both everyday behaviors and significant situations.
Sweat the details, such as maintaining and archiving effective minutes, board resolutions, etc. You want to avoid scrambling later (likely during a fundraising or sale process) to catch up with missing governance.
Content
An effective board is a well-educated board that focuses on what matters most. There are several critical aspects to this – from establishing a board calendar, defining an agenda for each meeting, and supplying effective board materials early to ensuring actionable follow-ups at the end of each session.
Board time is precious. I am a big fan of keeping in-person board meetings focused on thematic issues rather than wasting time on regular financial updates that can be handled offline. To that end, I like to provide a comprehensive monthly pack that provides the board with a balanced scorecard of the performance of the business against targets in between the quarterly in-person meetings. Sometimes that might necessitate a call if there is a material issue worth examining, but you can often get by with a few emails.
Establish a board schedule to cover the significant thematic areas where a board can assist. At a minimum, there should be an annual strategy session (to ensure that the board is aligned with and can provide input on company strategy) and a separate budget session to establish the plan/budget for the next year (and instantiate the strategy with operational details). Other board meetings can focus on strategic initiatives, progress against the company goals, discussion on potential pivots, etc.
Ensure you allocate time for key committees, including the audit/risk and compensation committees.
Work with the chair to establish a practical agenda for each meeting, including the essential governance issues that always crop up. Try to understand what issues are on your board's mind before meetings so you can tackle them proactively.
Provide comprehensive board pre-read materials, and get them out at least a week before the board meeting. Board materials that arrive the night before the board meeting are useless. Your board members will not have had a chance to digest them properly, and you will have a "garbage in, garbage out" scenario. I like to send out a more extended pre-read pack at least one week before and then have a much shorter "on-day" deck to guide the conversation in the meeting. People cannot digest massive amounts of material in real time, and if you cut down the details, they will remember the key elements you need.
Have your management team present their areas of ownership at board meetings. Your team should be in command of their areas of responsibility and comfortable with how they are working together cross-functionally to achieve the company's objectives. Your management team is your force multiplier. The more they shine, the more you shine as a CEO.
Ensure that action items discussed at the board meeting are recorded and assigned to responsible parties with a target follow-up date. Don't be shy about allocating tasks to board members and holding them accountable. In the past, I have invited the board to a subset of our internal task management systems, such as Asana, so they can be held accountable for their follow-ups just like everyone else. In addition, any significant open action items from the previous board meeting should be quickly reviewed at the start of the next meeting.
Ask for feedback on your board meetings and try to improve them continuously.
Alignment
You must ensure board members, investors, and management are aligned from mission to outcome and it’s important to try to engender a strong sense of teamwork and collaboration in getting from here to there.
Ensure that you have alignment across the company's mission, vision, strategy, and values. Ensure alignment on both the "why" and the "how." Ensure your board shares the same goals, values, and risk appetite as you do. The debate is healthy, but once a decision has been made … all need to pull together as one.
Ensure broad economic alignment exists across the board, management, and shareholders. Ensure there is alignment on what "winning" looks like. Ensure meaningful financial incentives exist for all key contributors.
Ensure your board is aligned with management and with reality regarding the time horizon to exit and projected capital requirements.
Work to ensure a strong sense of teamwork and shared accountability. Take the time to build rapport between board members and between board members and management. Have a board dinner the night before each board meeting to build relationships and address any soft issues before becoming hard ones!
Communicate, communicate, communicate. Ensure that there are regular 1-1 check-ins with board members, even between meetings. Be humble, open, and honest in all correspondence. Don't hide bad news. Engage the board in solving the challenging problems.
Effective boards are built on trust, and trust is built on transparency. Trust is hard to gain and easy to lose. Never ever forget this.
Feedback
I'd love your feedback on the above. What has worked and not worked for your organization?
