Building a value-add board of directors is not an easy task. Many times, startups begin a board of directors with angel or venture investors and their contacts. But, it is important for a founder/CEO in any stage company to have a strategy for building a board of directors. Read on to learn how to build a board of directors.
Not only does a board of directors have a fiduciary responsibility, but they should also help you objectively analyze your strategy. A good board member will be able to see potential pitfalls that you have not.
We have built boards for over 20 years. In our early days, our board was comprised of mainly investors and we spent most of our board meetings reviewing financial metrics. Was this helpful to us? Some parts of it were. We learned that “cash flow is not a theory” from one insightful board member. But, regurgitating financial metrics only didn’t propel us forward. So, we sought out to change our board and bring in fresh perspectives. We even brought in some board members outside of the technology community and a well-known executive coach. By rounding the board with other perspectives, it helped us move from a board with a financial focus only to a more forward looking approach.Having an executive coach on the board was also helpful to us personally. Her insightful questions about our growth and leadership made us think about managing the company differently.
How to build a board of directors
- Where do you have blind spots? We all have areas of our professional capabilities that we are not as strong as we would like. For example, if you are a technologist, do you lack skills in marketing? Look for board members with expertise in areas that you lack skills. They can look out for your blind side.
- Create a well-rounded board. Instead of gravitating to people who will agree with you or discuss topics you like, try to use this an opportunity to stretch and bring in executives with different perspectives.
- Create a pay and stock option plan that works for you. Beware of the board member that only responds to you in board meetings where they are getting paid. Yes, a good board member will cost you. But, it should not be one-sided. And stock options should vest, just like the employees. Don’t be dazzled by someone’s credentials only to have them make you a low priority after they’ve received their stock.
- Create a standard board member term. We used a one year term, but you can create any length of time that you like. The reason that you want to create a defined term is to limit any exposure if the board member ends up not providing the value that you need. Also, your needs will change as you grow and you’ll change your board composition to match.
- Beware of the problem finder. We’ve all met this person who criticizes everything and finds problems with all of your plans. A technique that we learned when dealing with a person like this is to reply with “what is your suggestion / how would you fix this problem?”. Watch the silence.
- Difficult conversations. There may be a time for you to have difficult conversations with one or multiple board members. Remember, these are accomplished people and they are not your staff. You need to treat them as such and the matter with delicate professionalism.
- Tell them what you need. Everyone is busy and overloaded these days. Instead of assuming they will know what you need, don’t be afraid to be direct. “I need a introduction to John Smith in your network.” or “I need a consultant to review our technology plan.” Add in any descriptors to help find the right help. “I need a new audit firm that isn’t going to CYA the entire project”.
- Make them a part of your company. Without, of course, going to far into day-to-day execution, it is helpful for your board to know key executives, important partners, clients and staff. They will understand your company better and your staff will benefit as well.