Managing Your Board the Right Way
On the surface, the job of the Board of Directors appears to be pretty simple. The Board debates and approves the company strategy. It uses full Board meetings, committee meetings related to finance and operations, and monthly reports from management to track things over time. This system works well for many companies; however, if you are a growth company CEO, you should ask yourself one, key question:
Are my outside Board Members paying attention?
The answer should always be, "Yes, absolutely." In fact, this is rarely the case, because competing priorities frequently get in the way.
Growth company Boards typically have five or seven members that are divided like this:
- Two inside Directors - usually the CEO and another senior executive, like the President, CTO, or CFO. Obviously, the inside Directors are very busy running the business; however, they also have the responsibility for dealing with the Board – both during and between meetings.
- One or two outside investors, who often sit on many outside Boards. I know some investors who sit on 10 or more Boards - each of which meets at least once per quarter. It's a guarantee that at least one of these companies will be experiencing a "big time crisis or opportunity" that will suck up huge amounts of time. Plus, your investors also have to look for and evaluate new investments. Therefore, they are time challenged.
- One to three independent Directors, who typically have many other corporate responsibilities.
Working with Board Members
Given these constraints, here are my tips for operating a successful Board of Directors:
- Dealing with investors. Generally, you won't be able to pick which investors sit on your Board. You will, however, want to establish a strong working relationship early. Establish a method for “casual” communication between Board meetings. Short, scheduled calls and lunches work well. Discuss your successes and challenges with your investors and ask for advice. Think through what you want out of each interaction beforehand, and don't hold back material information. Casual communication builds trust and transparency and will help you get real work done between Board Meetings. It also eliminates surprises during Board Meetings since Board Members know the story going in.
- Independent Directors. You probably will have some say on who your independent Directors are - either because you picked them or your consent was required as part of the investment. Independent Directors want to be helpful. You should look for independent Directors who can shadow the key functions in your business and who understand multiple business models – not just the business model that made them successful. For startups and growth companies, there are three types of independent Directors that are valuable:
Product and Technology Beasts know how to build and deliver things that customers will buy. They understand technology, product management, and product roadmaps. If you're lucky, they've launched successful products in multiple markets.
Go-to-Market Monsters love selling and marketing and can give you advice on how to organize and measure a sales force, generate demand, and position against the competition.
Operations & Scaling Machines are valuable when your company starts to "cook with gas." Your company turns cash flow positive, revenues double in a year, and you are hiring people at a furious pace. The way you do almost everything from selling to customers to building products and providing aftermarket support will change. Scalers help you manage the Big Leap to a sustainable growth company.
Your Management Team & the Board
Both your Investor and Independent Directors can serve another important purpose; they can work with you and your management team on key issues to avoid problems or seize on opportunities. Here are some areas where independent Directors can be valuable
Establishing the right incentive structures for salespeople.
Working through competitive issues.
Prioritizing product requirements.
Resolving HR issues.
Let me add that you shouldn't be bat phoning your Directors with every little question known to man. Organize your information concisely, get the right people in the room, and talk through issues efficiently. Propose solutions and explain the steps for dealing with the issue. This approach has several advantages:
- Your Directors get to know and appreciate your team.
- Your Directors get to understand your business much better than if they were just coming to your Board and committee meetings.
- Based on their advice, you can make progress much more quickly on key issues.
- You can identify unexpected issues early and deal with them.
Things to Avoid
Three are some things you should avoid when dealing with your Board:
- Hiding Bad News. Don't withhold bad news or try to spin it to make it look good. Bad news is bad news. You need to be straightforward and factual about it and have a plan for dealing with it. If you need advice remediating a problem, make sure your Board members weigh in.
- Behind the Scenes Gossip. It's a simple fact that Board Members talk to each other when you're not around. When a company isn't doing well, these conversations happen more often. You want to make sure that every Board Member has the same set of facts at roughly the same time and, whenever possible, you are involved in debates over company strategy and operational events.
- “Star” Directors that won't put in the time. You might get the opportunity to attract a "star" Director that would raise the profile of your company and attract investor, customer, and partner interest. Beware of shiny objects in the form of star Directors. The star still has to be willing to work, or he’s not the star you needed.
Always Look in the Mirror
Let me discuss something that can inevitable. Your Board might decide that your services as CEO are no longer needed. Many CEOs are shocked when this happens, but, assuming that you aren't grossly incompetent, you should just chalk this up to the vagaries of the business cycle. There are CEOs that are great at starting, scaling, or driving exits for companies. It's pretty rare that the same CEO is good at all three.
Initially, when you’re asked to examine other opportunities, you’ll likely take it personally. Then you’ll think about all the things you could have done differently or better. It’s possible that you might feel that your Board should have provided a little more support. The most important thing, however, is to think about yourself. Specifically, you should analyze:
- What you liked and didn’t like in the role.
- Whether you were a good leader, mentor, and motivator.
- Whether being a CEO is important you.
- What you like doing when you come to work. Hint: It might not involve doing a lot of CEO things.
- The impact you had on your company, market, and customers.
- If you have it in you for another hardcore CEO run.
Once you’ve looked in the mirror, play back your thoughts with trusted confidants. Encourage feedback – no matter how brutal. And, if the answers are all positive and you feel recharged, you’re probably ready to become a company’s “next CEO.”