No Board Member Ever Got Fired for Not Doing Anything
A guide to maximizing the benefits from meetings with your board of directors
The board meetings at my first company, Shells: Interactive Film Arts (yes, a truly awful name), almost 30 years ago were a waste of time for both sides — management and investors alike. In my mind, the meetings were a necessary burden. I wanted the board to keep the money flowing and not interfere with my efforts to build the company.
What did we do at these meetings? They consisted almost purely of updates. Discussions, if any, were about decisions that had already been made — not about any future decision that might add value to the company. This wasn’t terribly different at Aternity, the company I established a decade later with veteran entrepreneur Amnon Yaacobi and excellent investors (Vertex, Genesis and Intel Capital); most of the board meetings were just updates on our activities during the previous quarter.
I learned a lot from these experiences — about what not to do at a board meeting.
There are many aspects of making the most of your board of directors, like when to bring in independent directors, when and how to form committees, how to keep the board a manageable size through subsequent investment rounds, when and why you need observers, etc., that we’re not going to touch in this post. Here we’ll focus on just one thing: how to maximize the benefits from meetings with your board of directors.
When we founded Aleph,
(my assistant at the time and today the leader of Aleph’s Ampliphy platform) and I wrote a guide for efficient and effective board meetings. After you finish reading this post, if you’re interested in going into this topic in more detail, you can check out the guide here.1. Objectives
What is the purpose of a board of directors? Bear in mind that the members of the board experience the company at individual, discrete points in time. In contrast, management experiences the day-to-day work and continuous flow of the company. This isn’t a contradiction; it’s an opportunity.
A guest in a home can pick up on problems that the inhabitants are blind to. They have a broader perspective, a means of comparison. They can see the flaws, the opportunities and the objectives with less of the day-to-day “noise.” Your directors are your “guests,” coming in and viewing your company through the broader perspective generated by their wider involvement with other companies and with the market.
With that in mind, what objectives should you aim to achieve at a board of directors meeting?
- Make sure everyone is up to date on the company’s objectives, accomplishments and plans.
- Enable open discussions that leverage the value found in each board member’s knowledge and unique perspective.
- Come to conclusions and decisions about issues that are within the board’s purview.
Board members ideally come from different backgrounds, with different networks of contacts. It is possible — and, in fact, desirable — to expect their help in recruiting personnel and connecting with potential clients, partners or investors. Make sure to point out and celebrate the assistance that board members contribute, both as individuals and as a group; it’s motivational! Competitiveness between board members can actually be helpful, and thus it shouldn’t come as a surprise that gamification strategies, like a leaderboard, work well even on board members.
Caution! A board meeting is not — and should not be used as or allowed to turn into — a product management meeting. Often product decisions seem important, but practically there is little chance of receiving valuable comments or insights from members of the board. And devoting time to such discussions will make it impossible to use the time to tackle issues that will actually create added value for the company.
2. Frequency
How often should the board meet?
The right meeting frequency (as well as the content of the meetings) depends on the stage of the company. While there is always a need to update board members regardless of stage, the potential for positive contributions by the board is stage-dependent. Counter-intuitively, before there is product-market fit, there is less potential for active, positive board contribution (as mentioned above, the main value the board members provide is in their networks, connections and big picture view — not in the product details). At that stage, then, the period between board meetings can be longer: every three months, for example. If the board is comprised of just one investor and the entrepreneurs, formal meetings might even be unnecessary altogether. That said, when that was the case at Multinarity, the team took the opportunity to create the right board culture and processes suitable for the milestones ahead and when other investors joined.
After sales begin, however, and, even more importantly, before pivotal events such as raising capital, board meetings must be held more frequently: every two months, for example. Alternatively, intermediate informal meetings can be held in between the formal board meetings.
A primary cause of too-frequent meetings is new investors in the company (and especially if they are new altogether to the capital investment field!). At the start, new investors will typically feel out of control and lack confidence in the company’s status, progress and available information. They will often request frequent meetings and updates so they can feel confident that they (and, therefore, you) are on top of things.
This is a real challenge that demands a real solution, but — here’s the secret — it doesn’t need to be solved by board meetings! If you, together with the board, determine the most important success metrics and make sure to share them every month or every two weeks, you’ll see tremendous gains in trust with barely any losses in time. If these are really the most important success metrics, you’re probably measuring them anyway as a matter of course. Sending them on to board members takes very little time but has a very large impact on building investors’ trust, directly decreasing the time you need to spend actively managing the investors.
3. Preparation
Preparation is probably the most important aspect of board meetings, and yet, in my experience, it tends to be overlooked, especially when the board members are not involved in defining the meeting’s objectives. Simply making sure that involvement happens (i.e. asking them two weeks before the meeting what they consider to be the important issues to be discussed) gives you invaluable insight as to what they deem important and what must be discussed.
Once you know what to prepare, do it well! Preparatory materials must focus on the company’s status and must provide the background for the board members’ discussions. A slide presentation is usually less effective than a document because either it will contain an abbreviated amount of text (normal for a slide presentation), requiring someone to actually present it to the board members so they will get a full understanding of the material, or it will contain a great deal of text that tells the full story… but then it would have been easier to read as a document.
And while we’re on the topic of length, let me caution against bulleted-form or overly long, wordy or massive amounts of preparatory materials. Being thorough but succinct displays your focus and expertise. Being the opposite displays… well, the opposite. As Mark Twain is famously quoted as saying:
“I didn’t have time to write you a short letter, so I wrote you a long one instead.”
It is a worthwhile exercise to limit your primary material to six pages, with additional resources available to supply greater depth.
What should those six (or less) pages contain? Begin with a summary of the changes since the last meeting: the good, the bad and the ugly (it is, after all, a startup). Transparency is a significant part of building the trust that is the foundation of an efficient and effective board of directors. Information that should always be present includes: financial situation (cash balance, burn rate, revenues), human resources status (including significant staff who have joined and left, especially if voluntary), sales compared with forecasts and budget, and readiness to meet the targets set for the next quarter. At earlier stages, the information can focus on key initiatives required to reach product/market fit. For example, a company supplying automation for commercial sites would focus on the level of automation reached in its processes. A company building a hardware product might report on compliance with production timetables and certification. At later stages, metrics on product adoption and sales expansion would be the focus, and should accordingly receive top billing in the preparatory material.
Since the most significant part of the board meetings is the discussions that take place, background reading providing context for these discussions must be included in the preparatory materials. Supply whatever relevant material is needed for an in-depth understanding of the situation, even if it is extensive. The overview of what decisions are required and high level considerations should be in the primary materials, with links for additional reading and preparation. The board members, through their investment, have made a commitment to the company. There is no need to feel sorry for them (us!) and try to make their lives easier. The alternative is an uninformed, inconclusive discussion and a waste of everybody’s time (mainly yours).
I recommend sending the materials a week in advance of the meeting. That gives you time to receive and respond to requests for clarifications before the meeting date, which equals no time wasted on those clarifications during the actual meeting. That also gives you the time and ability to conduct a preparatory conversation with each board member. Since the purpose of the meeting is the exchange of opinions, discussion and decision-making, preparatory conversations reveal any significant differences of opinion between board members, enabling management to more successfully direct the discussion.
4. Structure and Location
My recommended structure for a three-hour meeting is 30 minutes of updates, 90 minutes of discussion with the management and 60 minutes of closed discussion. The closed discussion should start with the board and the CEO alone, optionally followed by a board discussion without the CEO. I find that including the executives in the discussions when possible is a real tool for the CEO, creating greater commitment to the goals set and decisions reached.
That said, deciding which issues shall be discussed in the closed part of the meeting and which in the open part together with the managers is a decision that should be treated with the delicacy it deserves. The aim must be to ensure maximum openness and transparency while maintaining sensitivity to issues that could be detrimental for the executives. I have been present in meetings with the management in which a board member asked: “Wouldn’t it be a good idea to sell the company?” Or: “Do we need to replace this member of the management?” (Wow.) Such questions can cause real damage to the CEO’s ability to manage the company and should be asked in a limited forum. A sabotage attack of that nature emphasizes the need to prepare both management and board members before the meeting and ensure that everyone is on the same page about what is to happen at each stage of the discussion.
It is reasonable to expect — and act according to the expectation — that board members will both read the preparatory materials and arrive on time. I was once faced with a situation of a board member who regularly arrived late. I addressed it by making sure to always start meetings right on time. After two such meetings, the problem was solved. In a similar vein, I once witnessed a meeting where the CEO was asked questions that made it clear that the asker had not read the preparatory materials. The CEO’s response? “The answer was on page two of the materials we sent in advance of this meeting.” Enough said.
If you cover the general “what has been done since we last met” in your preparatory materials, you can make the updates discussion at the meeting much more focused and productive. I advise having each manager present in the same format: a dashboard highlighting what is and what is not progressing according to plan, both for the KPIs they own and initiatives intended to drive change for those metrics. This allows focusing on exceptions, like aspects that are not making the expected progress, that can and should be a focus for discussion. The dashboard should also include core initiatives for the next quarter, and these initiatives must be linked to their potential effects on the company’s objectives and KPIs (e.g. product quality, acquisition of marketing leads, converting opportunities into sales, etc.). I have often experienced executives benefiting from looking closely at the links between initiatives and objectives at board meetings. Frequently the link turns out to not be as strong or direct as first thought, and managers are able to cancel irrelevant initiatives or change, improve and focus them.
If you (or your managers) identify specific insights as “important for the board to know,” but can’t actually pinpoint why those insights are important or what decision-making process they will inform, that’s a red flag. It’s likely that those insights will be more of a hindrance than a help. Examples of information in that category might include new insights about the efficacy of television advertising or the nature of a new version of a product. In my experience, when board members respond to this type of information, the feedback is usually not significant, and it can lead to a reduction of the conversation to a product discussion.
It is important to remember that management will always have more context and background regarding the product than any of the board members. Rely on them to direct the conversation, filter the responses and set the right boundaries for their applicability. Characteristically, good investors have “strong opinions loosely held,” and their responses should be treated accordingly.
A word on physical vs. virtual meetings: One of the objectives of a board meeting is to create the interpersonal relationships and trust that allow difficult decisions to be made. I find Zoom meetings inadequate for that purpose and I prefer to choose investors who will commit to attending physical, face-to-face meetings. More than once, I have flown to New York or San Francisco just for a company board meeting.
5. Making Decisions
Making decisions is the key outcome of a successful board meeting. With that in mind, make sure not to “bite off more than you can chew.” There should not be more than two or three subjects up for discussion, even if you feel that you have more issues you need direction on. How do you decide which issues to choose? One thing I learned from my partner Aaron Rosenson about diligencing a company was to ask if the outcome of a question is likely to have any real impact on an investment decision. The same applies for evaluating whether a discussion topic is relevant for the company’s direction. If I take all the possible answers into account and realize that whichever way I choose to go would have no strategic impact, then I probably don’t need to discuss it at a board meeting.
An important category of board decision-making is the allocation of resources to achieve goals. Instead of just back-and-forth on the establishment of objectives (e.g. should our annual sales goal be $10M or $15M?) the board’s value is in discussing how best to allocate resources to achieve those objectives (e.g. what additional resources are necessary to achieve the additional $5M growth in sales? Is it worthwhile to invest that sum if contrasted with fewer months of the company’s runway?) Other categories of decision-making that can benefit most from the board members’ extensive and varied backgrounds are executive hires or timelines for raising capital.
One technique used to reduce the pressure induced by decision-making processes, particularly if you need to deal with a board member that has what’s been referred to as a “reality distortion field,” resulting in frequently making decisions advocated by that member, is to agree that the final decision shall only be made a day after the board meeting. That’s not ideal, but the alternative is a dynamic that results in the avoidance of important discussions. My recommendation is to know yourself and the board members and adjust the mechanisms accordingly.
The ROI of a Board Meeting
How to structure a board, how to prepare the discussion and how to optimize use of the management’s very valuable time are issues close to my heart. Your board of directors can be one of your company’s most valuable assets — if you put in the work necessary to leverage it. Structure the board wisely, prepare for meetings thoroughly and run the discussions properly. The decisions made and guidance given will provide some of the best returns you can hope for.
This guide was originally a post for Monday.com’s Startup for Startup group. See the original post in Hebrew here.
