CEOs are advised to build better boards, but doing so is hard. Most plough the leader’s lonely furrow and board building does not make the priority list. Other CEOs recognize the value and build better boards, which provide solid advice, facilitate business introductions and help raise funding.
Over the past 20 years, I have served on multiple boards of early stage companies from best to worst. Here are some insights (mostly learned from fellow board members) on building a better board to help grow your company.
1. Prepare for a journey, not an event
What are the key challenges you face in achieving your company’s ambitions? What are your team’s skill and experience gaps? How could new board members help?
Consider how you will attract the right high caliber individuals. Being a company director is not a trivial matter – the obligations are significant. If necessary seek help or call the CEO of a company you admire.
Carry out appropriate due diligence in the selection of board members. As part of this process, I encourage CEOs to ask three questions of potential non-execs:
- What will it take to grow my company from x to y revenue?
- Why do you want to be on my board?
- What have you contributed to other boards?
Also consider how you will compensate non-executive directors for their time and commitment.
2. Make role of the board clear
For founders, the broadening of consideration beyond their personal interests can be uncomfortable. Self-evaluation is hard and true objectivity is rare. A good board member helps the CEO clarify thinking, evaluate options and make better decisions.
Keep in mind that the board’s role will evolve from being operational, e.g., help with international sales hires, to a more strategic one, where it may advise on mergers and acquisitions. At the start of each year, identify the top three issues you want the board’s help on and use these to frame your meeting agendas.
Board members are your partners in the development of the company. Their role is to ask tough questions and not to be “yes” men. They should be supportive, provide guidance and hold the management team accountable.
In addition to approving the annual budget and challenging company strategy, the board should have small working committees to review and approve both the annual audit and executive compensation plans.
3. Manage board composition well
Recruit the best chairperson you can get, preferably a former senior executive who all stakeholders will trust. He should have a track record in “doing the right thing for the business” and be able to manage the board’s social and political relationships.
The chairperson should provide leadership to the board, encourage its role in asking tough questions, sharing different perspectives and ensuring focus on the critical priorities. He should create a culture that enables all board members to challenge each others thinking.
Some days he may be managing investors; on others he may be helping you deal with nasty time-consuming stuff. He should be a mentor, coach and confidant, providing feedback on your performance as CEO and reviewing with you issues of concern to the board.
Keep board numbers small early on. It can be easy to get somebody onto your board but hard to get them off. Board building is an ongoing activity and different skills will be needed at different stages. Implement a simple method for evaluating board effectiveness.
A good non-exec rarely misses board meetings, arrives well prepared and participates actively outside meetings. Some investor board members may have contact networks and business-building skills that are more important than their money; others may have little value to add.
Don’t have too many of your management team on the board. This lessens its effectiveness and turns board meetings into management ones. In addition to the CEO, have the CFO/COO provide financial reporting and act as company secretary. Invite other members of your management team to present on a regular basis but not necessarily be present for all the board’s discussions.
4. Have better board meetings
Schedule eight standard board meetings a year, supplemented by major strategy and budgetary ones, possibly offsite with new voices like a customer or industry expert in part attendance.
Preparation and a formal structure help ensure productive meetings; e-mails stuffed with powerpoint decks arriving into inboxes on the morning of a board meeting cause confusion.
Circulate a board pack a week in advance with a proposed agenda, minutes from the last meeting, a CEO report describing key accomplishments and challenges, financial performance reports and short write-ups by each operating manager against agreed performance criteria.
Consider the following good practices:
- Deal with previous period performance early and efficiently.
- Clarify expectations for the coming period.
- Identify the most important challenges affecting the business and ensure quality time is carved out for their discussion.
- Limit presentations and maximize discussions to get the best value from the board.
- Ensure that well-documented actionable minutes are circulated promptly.
INSIGHT IN BRIEF Many CEOs plough the leader’s lonely furrow and have an ineffective board. Others recognize the challenge and build a board to help achieve their ambitions. Better boards provide experience-based advice and practical assistance. They can help with sales, funding, facilitate business introductions and attract key hires. Following the four practical steps described above can help you build a better board to grow your company.
INSIGHT IN ACTION
- Prepare for a journey, not an event.
- Think about the factors that govern the success of your company and how a board can help.
- Make the role of the board clear – a board is responsible for good governance, executive compensation plans.
- Manage board composition well – board building is an ongoing activity, and different skills will be needed at different stages.
- Preparation and a formal board meeting structure help ensure productive meetings.
Paul O’Dea is CEO of Select Strategies.
This article was originally published in Select Strategies’ “Growth Insights” series.