As an entrepreneur, board member, and advisor to CEOs and boards, Mimi Macksoud shares some things to consider when shaping a Board of Directors.
Just as companies have cycles and stages of growth, so do boards. As an entrepreneur or CEO of a growing company, establishing a board of directors that will add value at each stage in a company’s life is an important part of creating a sustainable business. During times when we need to rethink priorities and strategy for our companies, we have an opportunity to reexamine the board of directors. Too often, we view the board as a given, an afterthought, or simply a legal necessity. Instead, we should give careful thought to building boards as we focus on building companies. Whether starting a new venture, closing a round of funding, or approaching an inflection point for your company, what kind of board do you want?
Here are three of the most important criteria I use and recommend:
People: Identifying people to serve on your board is as important as hiring the key members of your leadership team. Be clear about the role each board member will play and what strengths you want them to bring to the team. While seeking relevant business experience, also seek diversity of perspective in terms of gender, age and world views. For early stage companies, it is a given that major investors will want board representation. Understanding how these investors work with their other portfolio companies should be part of due diligence before accepting financing. Go beyond your investor group and identify people who have relevant experience and connections. Be cautious about seeking out “leading lights” to join your board. Relevant experience coupled with bandwidth to devote time to your company are more helpful than brand names. This is not to minimize the value of brand name supporters; they may be a better fit as an advisor. The fiduciary board has real work to do and needs members willing to do this work.
Process: Process is all about the real work of the board and how it gets done. How the CEO and the Board Chair interact with each other and the board can make all the difference between a rubber-stamping, time-wasting board and one that adds real value. Make sure your board focuses energy on appropriate board matters: ensuring that the company delivers sustainable value to investors and other stakeholders. This means engaging in dialogue about and oversight of strategy, opportunity, risk, financials, and CEO performance. Operational matters belong to the management team. The CEO contributes to this process by sharing the right information in a timely way.
Culture: Sharing the right information at the right time is a foundation for building trust with and among board members. The culture of the board itself has an impact on the culture of your company. A high functioning board encourages candor and constructive challenges. Personalities of directors and social dynamics have an impact on performance of the board. A board culture which nips unproductive interpersonal dynamics in the bud augurs well for keeping focus on the needs of the company. Board leadership is responsible for managing a process that engages all opinions, encourages truth telling, and disciplines troublesome individuals if they exist. A well-informed board is primed to be ready for important decisions in a timely manner and can serve as a helpful sounding board for management.
Resources are always limited. We focus so much attention and energy on the success of our companies. By giving more active attention to building a value-adding board, we can create and leverage an available asset in pursuit of building a successful business.
Sage Partner Mimi Macksoud contributed this Sage Advice
This article was first published by Springboard Enterprises
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