Board Management: Thoughts and Resources for Building, Managing, and Navigating Your Board
The board-leadership relationship doesn’t have to be a challenge.
When it comes to building your board of directors, there are things you can control and things you neglect to pay attention to. Both of those elements come into play when it comes to creating your company’s board of directors. Thinking consciously about how to build a good board and how to then manage your board can help alleviate or help in navigating sticky board situations down the line. Here are some things to consider as you reflect on your current board or your future one.
It’s been said that having a board is like having a business marriage. Like any marriage, it helps to choose the right people to be in a relationship with. Folks in this place of choosing are lucky; not everyone gets to choose their boards from the get-go. Some leaders inherit their boards, which means stepping into business marriages that are already in place. (As coaches, we often hear about boards when our clients are dealing with problem board members. This can include bad behavior ranging from conflict of interest to being an outright jerk. More on that below.)
The point of the board of directors is governance of the company and financial responsibility to all shareholders. However, often at the time of term sheet negotiations, we think of board seats as control. At the early stages of the fundraising game, founders tend to pay more attention to the terms of the term sheet, than to the content of their boards.
When fundraising, founders can be so desperate to get the money, they rarely think: what will the investor board relationship be like? A good question to ask is: What are the terms in this term sheet that speak to board seats? This includes not only who the board members are, but who gets to appoint them. For example, in negotiations, a CEO can preserve their rights to veto who gets a board seat.
Another good question to ask as you build out your board is: Who deserves a board seat? In what way is this person going to serve the overall objective that we’re all in this together?
Who deserves a board seat becomes an issue with co-founders. In fact, one way conflict avoidance shows up is giving your co-founders board seats when they don’t deserve a board seat.
Remember how board seats get thought of as control? Think about the number of board seats you have and the person who will be sitting in those spots. When you think about this in terms of how a board is designed to function for governance and for the fiduciary responsibility to stakeholders, looking at common board setups will feel problematic. Consider a four-person board scenario, for example, that’s composed of two investors and two co-founders (both of whom are employees). That scenario is a tricky situation because they can become deadlocked. This is why it’s important early on to bring on non-investor board members to diversify the board seats. Another dynamic to consider carefully is putting co-founders on the board. When the co-founder of the CEO, for example, is on the board, that technically makes an employee (the co-founder) a supervisor (a director).
There are a few ways to create a board and choose board members who can hold the key responsibility of being on a board and take that job seriously. Some clients have created job descriptions for board members which include specifically the legal fiduciary responsibility of the role. We’ve had other clients have an annual review for their board and do a 360 review for the board as part of that annual review process. These clients have also had a mission and values created for the board as a way to capture what they are here for and how they behave. All of which have been wildly successful.
What is often overlooked in board creation and board maintenance is explicit and intentional conscious relationship building. It’s worth spending time thinking about, crafting, and discussing (for alignment and agreement): How do you want to design your relationship? What are the rules of engagement? How often are we going to revisit these commitments to reinforce and update them? If this step is forgotten, all too often, investors and entrepreneurs assume what their roles are when it comes to boards. Without clearly stated roles and responsibilities, as well as how everyone agrees to play together, the sticky situations that bubble up can turn into the mythic-sized stories we hear about all the time about boards behaving poorly.
As the CEO, how you think about your board is just as important as how you go about building a good one. If you see the board as a bunch of bosses, you’re exacerbating a power differential and abdicating your own power. Some good questions to ask are: How do you relate to power? Where and when do you ‘lose your seat’? What do you need to shift (possibly internally) in order to keep your seat?
Further Resources:
Read: Startup Boards: Getting the Most Out of Your Board of Directors by Brad Feld and Mahendra Ramsinghani. This tome covers everything on the ‘how to’ of effective board building and management.
Have a non-profit board? Here are some board resources on BoardSource that might be handy. There are many more resources on the site.
2. Governance as Leadership: Reframing the Work of Nonprofit Boards
Navigating some tricky board dynamics? We captured a conversation among our coaches in a post on that very topic: Navigating Board Dynamics
Listen: We’ve had some useful podcast conversations over the years with VCs and entrepreneurs on boards. Here are a few to dive into:
- #70 — The Inner-Workings of a Good Board — with Brad Feld & Fred Wilson
- #119 — Investing in Trust — with Fred Wilson
- #113 — Invest in Being Yourself — with Bryce Roberts & Chris Marks
- #45 — What’s Love Got to Do with It?- with Fred Wilson & Brad Feld
- #20 — Investors are Human Too — with Bijan Sabet
- #54 — Hearts Broken Open: The Case for Conscious Leadership and Entrepreneurship — with Matt Munson
Thinking about a board of directors for your company, or revamping your existing board? We know that a critical mistake entrepreneurs make is not thinking about their board of directors early enough. We created a 4-day self-guided practical skills course — Reboot Your Board — on managing your board. These four days of content are for any company of any size, including those which haven’t yet taken investment. We take you through the practical challenges of growing and developing a high-functioning board.
The board-leadership relationship doesn’t have to be a challenge. In fact, it can be one of the most rewarding aspects of your leadership journey. When done well, the board-CEO partnership can help each party grow and become the best possible person they can be–all while supporting the core purpose and mission of the business.
