Helpful or Useless?
Board meetings have changed a lot during the years but I still see a plethora of funders and founders wasting time in never-ending useless board meetings. Board meetings tend to be a great source of stress, a nuisance as well as a significant time suck.
Why, you ask? The simple reason is that there isn’t an understanding between founder and funder as to the role of the Board of Directors. As such, board meetings are often driven by operational emergencies and short term tactical thinking instead of long term strategic planning driven by business objectives. What makes a successful board meeting? In my opinion there are 4 components that drive a successful board meeting:
(1) board composition and attendees
1. Board composition and attendees
Formal board roles are often driven by legal requirements. That said, having the right people at the table can completely transform the dynamic of the meeting. It’s my belief that from the outset, founders & funders should collectively work on the composition of the board, selecting people who would best solve the strategic challenges facing the company.
Frequent Funder mistake: Often investors see board meetings as bureaucratic events that satisfy legal requirements. Just because an investor has the right to a board seat does not mean that he/she should take it. Anyone occupying a board seat needs to have the time, inclination, will and skills to significantly contribute to the company’s building process. If the investor is unable to do that, they should commit to finding a proxy who can. It’s not fair to founders to deny them that resource.
Frequent Founder mistakes: Founders tend to take for granted that Board attendees are ONLY those defined by the shareholder agreement. That does not always have to be the case. Additionally, founders often leave Independent Board seats vacant even though they have been given the opportunity to fill such roles.
Tips for success: Founders and Funders should have an open dialog and collectively discuss who will be occupying the board seats to make sure that there is the right combination of skills, experience and personality. If the initial investor is not going to take the seat, the funder and founder should openly discuss who will. If Independent roles have been agreed upon, the team must make it a priority to fill them from the outset. It is a wasted opportunity to leave these roles open. Lastly, if the board team is small and functional, funders and founders should not be afraid to invite advisors or other externals trusted party to board meetings if they can add value to specific issues the company is trying to tackle. Board meeting visitors might be temporary and just join 1 or 2 meetings. What is crucial is that at each board meeting there are the right combinations of people and skills to help during the company’s building process.
I strongly believe there is significant value in conducting board meetings in the company’s office. While I appreciate the convenience of a “virtual” board meeting via Skype or Hangout especially for funders sitting on multiple boards across multiple geographies, I strongly believe there is a lost opportunity when they are not conducted in person.
Board meetings conducted in person will help funders and founders to build the right team dynamics amongst the entire team, not just at the board level. They are an effective part of the company’s life and should not be treated as some sort of secret meetings with secret attendees arriving from Mars.
Frequent funder mistake: Prioritising personal logistics and travel schedules over what’s best for the company. It’s understood that investors can be very busy across multiple companies but it must be understood that being a Board member is a commitment not a leisure activity or status symbol. I hate investors that push founders to have board meetings in crazy locations to accommodate their travel schedule.
Frequent founder mistake: Treating board meetings as private, stand-alone events disconnected from the rest of the company and its team members.
Tips for success: Funders and founders should work together to schedule at least 4 meetings a year at company headquarters. These meetings should be an opportunity for funders to get to know the entire team (from the executives to the junior staff), to get to know the company culture and to spend time learning about the business and the team outside of the Board room. I always recommend a large team dinner and / or team activity with all members of the company and Board.
3. Board meeting preparation
In the early stage of the company’s building process, the creation of board meeting materials should be fixed to 1 hour. The rationale of this logic is simple: if the board meetings are intrinsic part of the company’s life, most of the materials have already been created and used by management and founder for both operational and strategic decisions. There is something dramatically wrong when companies allocate significant resources for the preparation of a board meeting. This implies a disconnection between the needs of the board attendees and the needs of the company. To minimize board meetings preparation do not create new docs but simply aggregate information in existing internal tools.
Frequent funder mistake: Some funders believe that they understand the business better than the founder or management. This is quite pathetic but I have seen it happen again and again. In other cases funders tend to be overly influenced by events happening at other portfolio companies. We need to always be 100% sure that the strategic priorities of a company are identified and driven by founders and management.
Frequent founder mistake: Use board meetings to highlight everything that is good and hide issues and concerns. Transparency is a key dimension of any good board meeting. They key is to learn how to harness the brain power of the board to address concerns and issues.
Tips for success: Create an agenda with action items in advance of the meeting and circulate to all participating parties. This should be completed at least 72 hours in advance so that everyone has the opportunity to think, strategize and problem solve in advance of the board meeting. Coming into the room prepared will make for a much more effective meeting for all parties.
4. Board meetings content
The most ineffective board meetings are those focused on operational updates. This means that funders use the board meetings to make sure that the company is on track, and founders use the meeting to re-hash status reports and growth figures so that they can look good and properly “manage” the board.
I hate these type of board meetings and I consider them a total waste of time. I believe that the ideal board meeting should last a maximum of 2.5 hrs: 30 minutes to be used for operational updates and other company administration matters, followed by 2 hours to discuss strategic issues of the founder and management team agreed upon in advance.
Frequent funder mistake: To consider the board meeting the only moment of interaction with the company is fundamentally wrong.
Frequent founder mistake: Using the Board meeting to discuss regular and ongoing business updates and developments. This means that the communication flow with funders must work well outside the board meetings . At this regard, I would recommend to split the timing of the operational updates (end of the month) with the board meeting. I have found extremely helpful to use a blog format as a way to provide the monthly operational update: same tool can be used for internal purposes (keep the team in sync), and to keep funders and other board members up to date.
Tips for success: The key to a successful board meeting is making sure that everyone’s time and energy is maximized over 2.5 hours and not squandered on operational updates. To do this, it is incumbent upon both the funders and founders to develop an ongoing and meaningful dialog whereby both parties are in regular communication and each point of interaction is seen as a source of value added. Funders and founders must figure out the best communication channel to exchange views/opinions such as: weekly calls, Facebook chats, monthly status reports, coffees, blog posts etc. It really does does matter which communication channel is preferred. The key is to develop a steady stream of information in both directions so that board meetings will be used to discuss mostly strategic topics.
NO boring board meetings
In my opinion, board meetings must be seen and managed as a key tool to help founders with the company’s building process. Founders that consider board meetings just an admin headache are missing a great opportunity. Similarly, funders that use board meetings as the basis of their operational update are giving up the opportunity to add value to the founder.
The next time we step out of a board meeting frustrated by what we perceive to be a boring waste of our time, we should see it as a missed opportunity and work hard to make changes to the process. It is the obligation of BOTH funders and founders to attend board meetings that are a source of value added and inspiration for all the parties involved. As funders, this might also imply that in some cases the right thing to do is to step down from the board and find someone whose time, skills and commitment will be of significant value added to the founder.