ACTIVIST VC BLOG
A good startup board puts the CEO and the management team into the center of their activities. Likewise, a smart CEO should pay some attention to supporting the board and think how to get the most added value out of the board.
Getting most out of the Board – three commandments for CEOs
Below is some experience-based advise to CEOs. (This is the second installment of our two part series about board best practices. You can find the first part here.)
1. Earn the trust of the board
A good CEO makes sure she has a confidential and positive relationship with the board – this helps ensure that when problems arise (trust us, they will), the strategy is changed, not the CEO.
An interesting Norwegian study indicates that the degree of trust between the board and the CEO is more important for board (and company) performance than the degree of power the board has over the CEO. The more the board trusts you, the better you all are likely to perform.
A key factor in building the right relationship is doing your own homework well:
- Prepare your board materials thoughtfully and highlight what you find material for the success of the company.
- Send your materials well ahead of the meeting. Four working days is a reasonable minimum.
- Keep in touch also between the board meetings.
- Tell bad news quickly. Trying to hide negative developments and bad news from your board is one of the worst mistakes a CEO can make.
When you do your homework and come to the board meetings well-prepared, you can also set expectations for the board and demand they do their job equally well and provide you and your management team with the support you need.
2. Educate the board
It is crucial to get new board members quickly up to speed in their board role. Even if the board members might be (they should be!) pretty experienced and skilled, they can have issues with:
- the internal jargon and terminology of the company and the business
- limited insight into the target market: trends, value chains, value drivers, etc…
When new board members are appointed, think induction. Think about how you can educate them about your company, your business, and your challenges as quickly and efficiently as possible. This will make them feel welcome and help them be effective, supportive board members.
It is to your and the company’s advantage to let your management team and the board interacting freely and often. Bring key management team members to board meetings, foster direct contact between board members and team members outside of board meetings, and encourage management team members to seek support and advise from board members when they feel the need.
Some Activist VC tricks-of-the-trade in educating boards include:
- Long enough joint offsite strategy sessions with the board and the management team that we have found to be very effective: these sessions are a good way for the board to truly see under the hood and also learn the internal dynamics of the team.
- Inviting board members to exhibitions or trade shows where you have a presence
- Inviting board members to customer events
3. Activate the board
Don’t simply react. Ask for support, give action items. Use the expertise of the board to your and the company’s advantage. There are at least two things many CEOs forget to do that may be the difference between success and mediocre performance:
- Be realistic and open about the gaps in your own skill set (we all have them!) and seek the board’s help in addressing them. That is what the board is for; however, they are not mind readers and you need to be active and activate the board instead of making them play a guessing game.
- At the same time, you need to be realistic about what you expect from the board: it is your job to run the company and make it successful. The board can (and should) be a strong supporting actor but you need to run the show. See this excellent Harvard Business Review article for views on this from your CEO colleagues in the US.
Bonus advice: team up with your chairperson
Typically the single most important part of board is the CEO/chairperson relationship. How the board meetings are run and how the board is managed can make a crucial difference in how much value you can get out of the board. The chairperson holds the keys to how well a board functions. Working closely with the chairperson helps you set the right agenda and the right tone in the board and make sure the board’s value is maximized.
A good and supportive chairperson can make sure the board does their homework (i.e. studies the materials properly before the meeting) and sticks to the agenda (instead of going on a tangent and micromanaging operative issues in an ad-hoc manner). It is your job (and to your advantage) to help the chairperson help you by letting him know what you need and want.
A good startup board knows that startups invariably face challenges and they also know helping solve them is one of the most important things they do. But they cannot help you unless you let them.
To read more about Activist VC views of what a good board is and how it should work, check last weeks blog entry called “Board – resource or burden?“