Managing Your Board the Right Way
On the surface, the Board of Directors' job appears pretty straightforward. 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 the one key question:
Are my outside Board Members paying attention?
The answer should always be, “Yes.” In fact, this is rarely the case, because competing priorities frequently get in the way.
BOARD COMPOSITION
Growth company Boards typically have five or seven members that are divided like this:
One or 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 to three outside investors, who often sit on many Boards. I know some investors who sit on ten or more boards, and each meeting is held 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.
Independent Directors. You probably will have some say on who your independent Directors are — either because you picked them or your consent was required for the investment. Independent Directors want to be helpful. You should look for independent Directors who can shadow your business's key functions and understand multiple business models, not just the business model that made them successful. For startups and growth companies, three types of independent Directors 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
Your Investors and Independent Directors can serve another essential purpose: working with you and your management team on critical issues to avoid problems or seize 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.
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 problem. This approach has several advantages:
Your Directors get to know and appreciate your team.
Your Directors will understand your business much better than if they were just attending your Board and committee meetings.
Based on their advice, you can progress quickly on critical issues.
You can identify unexpected issues early and deal with them.
THINGS TO AVOID
There 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 on remediating a problem, ensure 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 ensure 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 who 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 need.
ALWAYS LOOK IN THE MIRROR
Let me discuss something that can be inevitable. Your Board might decide that your services as CEO are no longer needed. Many CEOs are shocked when this happens, but, assuming you aren’t grossly incompetent, you should chalk this up to the vagaries of the business cycle. Some CEOs are great at starting, scaling, or driving exits for companies. The same CEO is rarely good at all three.
Initially, when you’re asked to examine other opportunities, you’ll likely take it personally. Then you’ll think about everything you could have done differently or better. You might feel that your Board should have provided more support. The most important thing, however, is to think about yourself. 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 to you.
What do 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.
Play back your thoughts with trusted confidants once you’ve looked in the mirror. 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.”