The board's role is to help guide major decisions, to develop the CEO and her executive team, ensure the survival of the business, and hold management to account. Photo / 123RF
"Who's on the board?"
A question I hear at least as often as I see a new startup.
Here are some observations on boards to help entrepreneurs and directors better select each other, work together, and create value.
Every CEO, to some extent, is dissatisfied with their board. They should be, for two reasons.
First, boards are put on pedestals where success or failure is attributed directly to them. This can lead entrepreneurs, in their first board environment, to be underwhelmed that they aren't the superheroes they're made out to be.
Also, boards are a step removed from the day-to-day meaning every CEO will need to educate her board to get value from them. It will feel repetitive and at times challenging, but it is not only worth it, it's vital.
Why? It's hard to step back from within a business and see beyond the immediate challenges, and it's easy for "advisors" to have opinions without responsibility for their outcomes. Boards are there to do both.
The board's role is to help guide major decisions, to develop the CEO and her executive team, ensure the survival of the business (read: raise capital!), and hold management to account.
They should look beyond day-to-day operations but retain a focus on execution, while recognising when they are emotionally attached to a decision or lack the experience needed to make informed calls.
There are two traps that some boards can fall into; treating a board meeting as a CEO's performance review and viewing their role as solely to ensure compliance.
If a board is there only to hold management to account, they're not aligned to creating value.
Genuine performance issues should be addressed immediately and waiting for a board meeting, the precious few hours you're all together, is irresponsible. It lets issues linger and wastes time to share expertise and address strategic issues.
Compliance is necessary, and we hear horror stories about high-flying startups that fail from lack of governance. While those stories are memorable, what about the startups that never take-off due to conservatism? I expect they vastly outnumber the former.
Perhaps a better focus than compliance is to consider of each decision: "Will this make the boat go faster?".
Many assume that high-functioning boards are always high-functioning. Most fluctuate from meeting to meeting, or topic to topic. It tends to stem from how they address decisions and discussion.
Boards I respect start by considering every input that could influence their desired outcome, share their perspectives on each, and finally conclude the best path towards success.
When done well, each member contributes expertise where they can and admits where they can't.
Many envision "the perfect board member" who founded a similar business and achieved success in a market with similar customers, pricing and funding. These features tell nothing of their culture, personality or approach to reasoning.
The practical advice of these individuals is hard to pass up. A startup is inundated with challenges and is advice as straightforward as "I had the same problem and solved it by…".
The risk is to assume that because an individual has specific experience, that they're capable of tackling new and unfamiliar challenges. Every startup, eventually, faces new and unfamiliar challenges.
It is crucial when recruiting a board to balance that desire for domain expertise with diversity, approach to decision making, reasoning, culture fit, and capacity to get stuff done.
The last is not to be ignored. A CEO generally doesn't need opinions, they need people who can take the weight of the world off their shoulders by contributing to operational projects, helping raise capital, mentoring team members, and making introductions.
In a startup, the role of a director includes supporting the development, culture and well-being of your CEO and her team.
Michael Carden (Co-Founder of Sonar6) wrote "If the company outgrows the founder, well that is probably the fault of the board." I'll add that burn-out, depression and other health issues, are probably the board's fault too.
The role of a founder is lonely. A board should be their CEO's most ardent supporters and closest allies - investing their time and networks in ensuring her growth and well-being.
Though, the best board is only half of the picture.
It is up to the CEO to enable, equip and guide her board to be successful. Board papers aren't to announce achievements.
They're an opportunity to educate the board, giving them information and tools to understand your challenges so they contribute informed guidance and to create value.
A CEO's responsibility extends to directing the meeting itself. A CEO, not a Chairperson, is the only person with the depth of insight required environment to define success, identify the metrics that matter, provide relevant context, and focus discussion on her challenges.
Every board will find its own rhythm, but hopefully this helps craft higher functioning boards, develop high-quality directors, and get more value from board meetings.
- Jack McQuire, Icehouse Ventures
Pie Funds CIO Mike Taylor makes his annual picks for the year ahead.