Building and working with a board of directors can either be one of the most rewarding aspects of running a company, or it can be one of the most painful business experiences you can imagine. The choice is yours.
One of the more interesting aspects of starting a company surrounds the creation of a board of directors. First, lets be clear that this is a board of directors who bear a fiduciary responsibility to the company and represent the shareholders. This is not to be confused with an advisory board, which has no corporate responsibility whatsoever.
For some of you, creating a board of director’s sounds like a pretty cool task; find interesting people to help guide you as your startup rockets upward. Slow down, sparky. Most board of directors are investors in your company (as dictated in their investment agreement) and therein lies the challenge.
Wrong Approach. As I advise all of my company founders/CEO’s, there are two approaches to your investors–the pre-investment approach where you are selling and convincing them, and the post-investment approach where you totally switch gears and make them your confidant. Most founder/CEO’s don’t get make this transition and by not doing so set themselves up for tension, disagreement and eventual dismissal.
Wrong Members. Board members are there to serve the interests of the company. Period. Members who seem to showcase themselves are of no value. Board members who are not experienced in the matters confronting the company today waste everyone’s time and do nothing to help the company move forward. Evaluate the issues in front of you and identify potential members who have experience in those issues. There should be a diversity of thought that comes from these selections.
Wrong Number of Members. Less is more and more is a disaster. Five is my magic number (when you have investors). More voices and opinions do not yield better meetings or outcomes. If you have selected the right members, there is no need for more members. A hidden gotcha is allowing board observers. Regardless of whether a person sits as a board member or an observer, their opinions are inevitably heard and you must make room for them to talk. Don’t be fooled into thinking that they are just going to observe.
Wrong Meetings. You control your board meetings. More importantly, you control what issues are discussed and how. DO NOT use your board meetings to pitch your board on why you are right. They are there to serve you–engage them and use them to help you solve difficult issues. In addition, do not waste time on content that can be read and reviewed prior to the meeting and that is purely informational. Again this wastes time. Your goal is to get 4 smart, experienced people in the room to help you and the company operate better.
I have seen too many great founders who stumble and eventually fail in running their board meetings. Most do this out of a lack of knowledge or understanding of the purpose and roles. Start by empowering yourself by leading your board instead of following.