Note: this article does not contain legal advice. If you are unsure of your legal/fiduciary responsibilities as a company director, please seek advice from your legal counsel.
Why boards have a role
I have worked on dozens of boards. Some for companies that rapidly gained traction and success. Others for companies that fought their way through several years of challenges, and then eventually took off. And then some that never quite got there.
It would be disingenuous to suggest that the boards of those companies were the only, or even the main, reason for each success or failure. But it would also be defeatist to suggest that there is nothing a board can do to improve the trajectory of a business. And I would go as far as to suggest that – especially for early-stage companies, there is quite a lot a board and its directors can do to help a company towards success.
Why not avoid boards altogether?
I know of both founders and investors who shun company boards. Many of them have had bad experiences with boards and board meetings. Examples of things that don’t work at all:
- Meetings where founders are expected to go through lengthy slide packs on a slide-by-slide basis, spending most of the meeting educating non-execs and investor directors about the business.
- Lengthy operational reviews where the CEO is being quizzed (or second-guessed) by directors who don’t quite know how to contribute constructively – perhaps because they don’t understand the business or the market well enough to bring new things to the table.
For this reason, some founders stop bringing the most important issues to the board, or perhaps give up on the board altogether. And some (otherwise skilled) investors actively promote this by shunning director roles, instead advocating more active involvement outside the board.
We have all sat through unproductive board meetings, and I have every sympathy with those who feel they’ve had enough. That said, I think it’s a shame to throw the baby out with the bathwater. In my view, the best answer to bad board meetings is not to give up on the board, but to make the meetings good! Because when a board works, it can be such a powerful catalyst for propelling a company forward through greater strategic clarity and marshalling of the wider resources that can be activated through the board, including non-executive and investor directors.
How can boards help?
To figure out what makes them good, first, let’s look at the purpose of boards and company directors. Let’s leave aside for a minute the (actually quite sensible) prescriptions from the Companies Act (I outline them here, for those who are keen) and focus more strategically on why the directors are there.
A simple way to think about this is that the board is there to help the business succeed. Assuming the business has a legal (and hopefully also positive) purpose and mission, the directors should then do everything they can (again, within the law) to help the business prosper. Start from that perspective, and it becomes surprisingly easy to think of sensible ways for a board of directors to do what it is there to do.
At its simplest this is about helping
- founders formulate and decide on the best strategies to overcome the obstacles that stand in the way of business success
- to make sure founders and management are held constructively accountable
To the last point, in my experience, most founders (at least those we work with) are incredibly motivated. If something isn’t quite working for them, it’s not for lack of motivation on their part. So in my experience, constructive accountability is more about having a structured framework for measuring and reporting progress. And by the way – good directors can help with best practice for those frameworks. There is a lot of “best practice” to learn from.
Here are some more things good directors can do:
- Ask questions to help stimulate debate and uncover opportunities and pitfalls the founders may not have considered.
- Help founders evaluate strategic options, by bringing an external view to a discussion. It can sometimes be hard to see the forest for the trees, and founders are often deep in the jungle!
- Help think about the priorities and timing of initiatives. Giving founders the “air cover” to execute in a focused way (rather than having them feel they need to try to do everything at once).
- Help founders make good hiring decisions. If you are world-class technical founders but have never managed, let alone hired a sales leader, it’s not always obvious what “good looks like”. Good directors can help you here.
So how do you make board meetings good?
1. Make sure you have the right directors on your board
The first rule is to make sure you have the right people in the room. This includes aspects of chemistry (we’ve all met toxic businesspeople). Still, assuming that the people you have around you generally are collaborative and trying to do the right thing, it’s then more a question of getting the right skills on board. So what should boards know (collectively)?
- How to build companies in your industry
- How to sell to your customers
- How to hire well and build your team for success
- How to raise money for startups and keep them funded
- When to lean in and when to get out of the way to let the founders get on with execution
This is not to say that all directors should be experts at everything. But collectively, you should be able to cover all of those bases. If your board doesn’t cover all of the above yet, it may be time to upgrade your board.
This is also not to say that your non-executive directors will be doing all the heavy lifting. The hard work (and the glory!) belongs to the founders. But there are just so many pitfalls when building a company, and it’s incredibly helpful to be able to discuss those pitfalls with folks who have real experience on how to navigate them.
Finally, no two businesses are alike, and one should always be careful to assume that you can just copy/paste. Still, there is a long list of things that probably won’t work, and it’s helpful to be able to stay on the shoulders of those who’ve tried those out themselves so you don’t have to explore every blind alley on the way (as you may not have the runway to do that!).
So do you have the right directors on your board? Good investors should help you with board composition. If they don’t, it may be time to refresh your cap table.
2. Prep well
The founders (management team) should make a good pack and circulate it a few days in advance. And the directors should make sure they’ve read it before the meeting.
And how do you craft a good pack? I discuss that in more detail here, but as a rule of thumb, begin the deck with a couple of slides on the biggest issues facing the company. If you start there, you are more likely to have the bulk of the meeting focused on how to solve those issues. And what can be more valuable than spending 1-2 hours a month discussing with some smart people who understand your sector how to solve the biggest challenges facing your business?
3. Remember what a board meeting is and also what it isn’t.
A board meeting is an opportunity for founders and directors to come together and discuss how to solve the biggest challenges facing the business. Yes – there are also some practical considerations (e.g. stock option sign-off), but if the principles of your option plan has been agreed and the pack has been circulated in advance, the actual signoff of this and other minor matters can be done in 15 minutes towards the end of the meeting.
What is a board meeting not? It’s not a weekly ops meeting. As I mentioned above, some directors aren’t quite sure how to be strategic, and so they default to do what they might have done in their prior lives as operators – they review. A common pitfall is for boards to spend 75% of the meeting reviewing each deal in the sales pipeline. Yes, sales is incredibly important, but it is also highly tactical and operational. And a good pipeline is far too rapid moving to wait 4-6 weeks between boards for a good review. The founders should be reviewing their pipeline weekly, and – if they don’t yet have the expertise on how to do this, their directors should help them with sales management coaching or with the hiring of a good sales leader who can put in place weekly pipeline reviews. I promise you, spending 45 minutes at a board meeting discussing how to achieve this will be far more effective in the long run than spending 45 minutes on the pipeline itself.
The board is there to help the company evolve and grow through strategic decisions, not to act as an operational steering committee.
At the heart of all successful business is a solid strategy (sitting alongside hard work and just enough luck when it matters). Not strategy as some far-flung philosophical concept, but in terms of getting focus on what the real problems and priorities are, and what things to do (and not to do) to solve them. It’s not endless lists of activities, but a few well-chosen decisions that can mean the difference between success and failure in the high stakes world of building startups. Done well, good boards can mean the difference between getting faster to the right answer or spending 6 months walking down the wrong path. Given the limited runway of startups, you can’t afford too many of those 6-month blind alleys. So, my advice is to bring together the best board you can find, prep them (and yourself) well and then go have some great board meetings to help your business get to the right answers (and results!) faster.