12 STEPS TO BOARD MEETING ENLIGHTENMENT

The best Founders construct a board the same way they build the management team

Have you ever heard comments like this about board meetings?

Wow, I love our board meetings. We have such a deep dialogue and I get so much value out of them.

They make me feel so energised.

In 25 years since I have been in business, I think I have heard 2 CEOs tell me something very positive about their board meetings.

I have experienced some appalling behaviours in board meetings and usually from ego-driven, pumped upped men.

A board that adds value is an outlier. Most CEOs I know just want to get through the board meetings and get back to running the business.

For the majority, they are a monumental waste of time, resources and money.

So why have board meetings if they are often such a waste of time?

Whether or not you legally need one, a board can be extremely valuable to you and your company. Your board can make a company (and break it!). The bottom line is if you want to be a grown up company and you have big aspirations you will need a board.

  • Everybody needs a boss

Whoever we are, we all benefit from some level of accountability. Without it we are more likely to go off the rails — we need people to hold up the mirror to us.

  • Raise your game

For example, knowing you have got to persuade your board about a new direction for the company, will force you to prepare and build a coherent case.

  • Point out things you miss

A good board will help you see the forest from the trees. You’re so close to the business, head in the day-to-day, whereas the board is not and can point out things you may have completely missed.

  • Improve decision making

A functioning board should be having high quality debates, with healthy conflict and different perspectives, resulting in better decisions.

Form your board early in your company’s life whether or not you have external investors. Because if you do it right, choose the right directors and engage them actively this can materially accelerate your business.

Clint Korver, a venture capitalist, and a teacher of a course at Stanford University called “Startup Boards: Advanced Entrepreneurship” says, “The most common mistake startups make is not having a board at all.” He points out that the research shows a majority of startups fail due to self-inflicted wounds e.g. internal decisions about founder roles, how much equity to allocate, new hires.

Here are 12 ways to start getting the most out of your board meetings.

1. Get the right mindset — the board is there to help you run the company

What do you think the purpose of a board is?

In short the board is there to represent the interest of all shareholders of the company and all other stakeholders (creditors, employees, etc.). And review the company’s financial performance and strategy, instil governance, set salaries, hire and fire executives and help provide counsel to the executive team.

But at the end of the day you and your management team are running the company, you are making the choices not the board. So you should make the board work for you.

Once you realise the board is there to help, you are more likely to ask for help. Some board members may begrudge being asked to do something but I find that the harder the board works, the better it functions.

Board members who are not pulling their weight should be replaced.

2. Get the right people onto the board

You want business people not administrators, people with experience and expertise who are complementary to your team, who can add different perspectives on the tough decisions. You want board members with strong operational backgrounds and credibility to attract customers, talent and investment.

Be as rigorous about the hiring of a board member as you would the hiring of a senior executive.

Constructing a good board involves identifying the right people for the right stage of your business e.g. get someone who understands the startup and scaleup world and/or who understands your market dynamics or brings unique attributes.

Don’t wait to make the composition of the board right — do it now! Boards can have a material positive impact on the trajectory of your business.

Source widely, interview many candidates, check references, get prospective board members to attend a meeting.

Brad Feld in his book Startup Boards suggests you ask yourself four questions about each candidate:

  1. What skills does this board member have? What would be the single most important contribution they could make to this scaleup?
  2. Will I learn and grow under the guidance of this board member?
  3. Do I see conflicts now or in the future which need to be addressed?
  4. Will my other board members engage effectively with this person? Are there any known historical conflicts?

Think about the sort of skills and experience you’ll need on the journey and don’t be afraid to change board members as you go through the various growth stages.

Skills of a good scaleup board member might include:

  • Entrepreneurial — has been there and done it before
  • Financial — has raised multiple rounds of capital leading to successful exit
  • Domain Expertise — has built products or services in similar markets

And remember it’s not just about their skills. You also want to get a values-fit too and a team member who will gel with the other board members.

3. Qualify your investor board representative

Easier said than done you might say particularly if you have investors who demand board seats.

But that is why, when you are raising funds, you want to make sure you are not only getting a good investor but also a productive and good board member.

You should do the due diligence on the investor’s board representative by speaking to other companies where they are or have been directors.

You want to end up with the best investors and the best directors.

4. Make sure you have independent board members

Ideally you have a board with a mix of investor representative(s) and independent board member(s).

Independent in the sense they don’t have the conflicts of interest like the other directors have. They are not management or have any material relationship with the company e.g. partnership or shareholding.

Independent thinking is what you want. Great judgement and leadership qualities. They should be doing their utmost to be unbiased and always acting in the best interests of the company.

They can be the voice of reason when conflict arises. Also, if they are doing their job properly, they may be less intimidating to talk to as they are less likely to be judging you.

5. Understand each board member’s interests and expectations

A board is a team but it’s not really a team! I coach senior leadership teams. One of the main characteristics of a high performing team is that there is a common purpose and clarity of roles along with a high degree of interdependence i.e. they rely on each other to achieve the team’s goals.

Now you would think that boards would have a common purpose of helping the company be successful. Yes, but it is more complex than that. Board members will likely have conflicting interests.

Every investor board member has at least two hats. The first hat is that they have a fiduciary duty to represent the company as a director and to act in the best interests of all shareholders. The second hat is they represent themselves as a shareholder, their fund or family office.

There is often also confusion about roles and responsibilities. Does the CEO work for the board of directors or the company? Does the board work for the company? Who holds board members accountable for their actions? And underlying all this, directors have responsibility to all shareholders.

It’s a strange position being a director because you don’t have all the information (you’re not involved in the day -to-day) yet you have power (to sack the CEO) and you have responsibilities to creditors and shareholders. So with this accountability and lack of information you can see how directors can get anxious!

These conflicts of interest can derail the performance of the board. My advice is to understand each board member’s agenda/purpose and expectations — look to find a common agenda. Call out the conflicts and make it clear which hat is being worn whilst you are in any discussion.

And get clarity on the different roles and responsibilities for the CEO, the management and the board.

The occasional reminder to directors that they should be acting in the best interest of all shareholders is also a good idea. Ask them, “Can you explain your decision as fair and reasonable to any shareholder group, including your own?”

Another main reason why coaching a board is often more challenging than coaching a leadership team is because you want independence from board members. This independence ensures there are different opinions in the room and honest feedback. You don’t want group think. You also want some interdependence so that the board can work together. It’s a fine balance between independence and interdependence.

6. Become a great facilitator of meetings

Often in the early days the Founder CEO is the Chair too.

I wouldn’t necessarily recommend this but whoever is in the Chair role needs to have the skills to facilitate and run great meetings.

I don’t have the space here to go into how to run great meetings — that’s for another time — but a good Chair keeps the board on track (i.e. focus on impactful matters), makes sure all voices are heard, decisions are made, ensures actions are followed-up, proactively communicates on a group and individual basis, manages the clock and maintains the meeting culture.

If the Founder CEO is the Chair I would recommend you have a lead director who makes sure all directors’ voices are heard.

7. Communicate in between the meetings to avoid surprises at the board meetings

In order to build good relationships with board members you need to spend time with each of them in between the board meetings. Keeping them in the loop with latest developments, means you remain on their radar, and you keep them engaged. Continuously communicate, don’t leave it to the monthly meetings.

Don’t just give them the good news, also share the bad news. It is standard human behaviour to not want to share the negative but a good director knows that. So pick up the phone and speak to them. Don’t spring a nasty surprise in the meeting itself.

8. Build a forward looking and dialogue driven agenda

Sadly so many of the boards I have seen in action are like reporting exercises. The executive team spends far too long putting the board pack together which the board never reads or one board member does and needs to look clever by mentioning there is a typo on page 44. Tedious and what a waste of time!

You need to have a structured agenda for each board meeting to get the most out of it. An agenda brings clarity, focus, productivity and saves time.

The agenda needs to encourage the type of dialogue you want.

Set time limits for the topic areas, check with board members beforehand as to whether they are happy with agenda items. Focus the agenda on forward-looking topics. Don’t let the meeting become a status update from the management.

Many board meetings are too backward looking. You want a 75:25 ratio in favour of forward-looking items.

The majority of the meeting should be around one or two key strategic challenges or opportunities the company is facing. Ideally you want a balance between short-term issues and long-term value creation ideas. Stay high-level rather than get into the tactical, nitty-gritty details.

A board member doesn’t think deeply about your business until they start preparing for the meeting. So make sure you send the board pack to them well in advance and ideally give them a weekend. When board members have not been given the information in advance, the meeting will be much less productive.

Arguably because of the many and frequent strategic changes start ups and scale ups make, board meetings are needed more frequently than for larger companies.

9. Board diversity is a competitive advantage

The best boards are often the most diverse. When I talk about diversity I’m thinking about age, ethnic, gender diversity and also skills, competencies and life experiences.

Let’s be honest, right now most founders are men and most investors are men. As a result it can be hard to get a diverse group on a startup and scaleup board but it is worth making the effort. I know diversity is not confined to gender but the research shows that the more women you have on your board the more likely you are to succeed!

A great board is a mix of intellect, experience, personalities, emotions, aspirations and, if the ingredients are mixed up correctly, it will bring something magical to the business.

Here a few other reasons why diverse boards are a good idea:

  • It will more likely reflect your stakeholders e..g customers, workforce, partners
  • More perspectives, better decisions
  • Setting example will have trickle down effect within the organisation
  • Better company performance

10. Minimise the size of your board

I would suggest that initially you start with three to five board members. For a fast-growing business this means you can reach out to all board members easily and make quick decisions.

And move up to seven as you scale. Bain Capital believes seven is the optimal number for making decisions.

You don’t need to put every member of the executive team on the board.

11. Follow up post board meeting actions

Many things get decided at board meetings. But many ideas also percolate and aren’t fully decided or require more work.

What you do after the board meeting can be as important if not more important than what happens in the time you have together.

Always keep minutes — to make sure you capture what went on and it’s also a legal requirement to sign off various items such as health and safety policy or approve company accounts.

If you took away actions — follow up. If a board member agreed to take actions, hold them accountable.

As with most meetings, much progress is squandered by lack of follow up. I know it sounds obvious. Yet more people are guilty of this than you’d imagine. It turns out many people are terrible at following up.

12. Evaluate your board

I think you should measure the performance of a high performing board like you would measure the performance of a high performing senior leadership team.

Not giving board members feedback is a missed opportunity to make the board more effective. They need to know how they are serving you well and the areas they’re not.

One way of getting some data is to run an anonymous survey where board members answer questions such as:

  • Rank each board member against a number of criteria e.g. decision making abilities, willingness to challenge, creative ideas
  • Is the board working on the right things?
  • Does the board have open and honest dialogue?
  • Is the board pack good? How would you improve it?

And ideally ask team members outside the board and other stakeholders about the performance of the board.

Summary

The best Founders construct a board the same way they build the management team — recruiting the best people with the right experience and expertise for the stage of the company’s life cycle.

Most board members have good intentions and strive to have a positive impact on a scaleup’s trajectory but too often board’s are neutral or damaging to the business.

In the minds of investors, how you run the board meetings will be a proxy for how you run your business — no proper agenda, information sent out late, meetings not starting on time, actions not followed up. Not what you want.

I have seen the good, the bad and the ugly when it comes to board meetings. When it’s good, it’s magical. Open debate, healthy conflict, challenging questions, diverse opinions, everyone contributing, good energy and good decisions.

It is not easy to get a board to perform to a high standard but that doesn’t mean you don’t try.

Getting a board to click could make the difference between success and failure.

Keep well. Give > Take.

It’s been a while since I last wrote my essay. I broke a promise to myself that I would do one every month. I don’t like breaking promises to myself or to others but I am being compassionate to myself. My mum died last year and I moved house — two reasons to give myself a break but my mum would want me to get back on the horse (she liked horses!) so I am and it feels good! And so this essay is for my mum even though she was lucky enough to not ever waste her time in too many unproductive board meetings.

Mark

Connect with me on LinkedIn

p.s. If you enjoyed it please share it, spread a little love. Mark’s Scale Up Essays are created by Mark Farrer-Brown, scale up Coach, Investor and Enthusiast. You can find out more about Mark’s writing and how he helps Scale Up Founder CEOs at Fit to Lead website.

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