Entrepreneurs, do you look forward to your Board meetings? Are they insightful, productive, and inspiring? Or are they more of a distractive obligation?
Your Board should be your greatest asset. If not, you need to take responsibility for it, and then act to transform it. If you follow these recommendations, you will create and unleash an asset that will better serve your shareholders, executive team, company, and career.
First of all, the composition of your Board needs to reflect the company that you want to become, and not the company that you are or once were. As just one example, if you are striving to transform your company into a multinational, your Board should be comprised of a mix of people that collectively possess the needed range and depth of perspective, experience, and professional contacts to do so.
Secondly, Board membership needs be viewed as analogous to a relay race, but too often it is viewed more like academic tenure. Different skill sets are required to take your company from startup to $10 million, from $10 million to $100 million, and so on. Or from a distribution to a product company, or from a domestic to a multinational company. Welcome all growing pains and adjust accordingly. Your Board needs to view its expected handing off of the baton as a great milestone achievement for them, and a confirmation of a relay race stage well run.
Thirdly, your Board needs to be one that works and is held accountable. Too often Board meetings are an exercise in “pop in” governance in which management tries to prove to the Directors that it is executing as well as is possible, while in turn the Directors try to prove to management and each other that they actually add value to the discussion. Although governance is an important function, it is also only a small fraction of what your Board is capable of contributing.
Instead your Board needs to be actively engaged in true corporate development. While you are focused on effectively executing the agreed upon strategy and delivering the expected operating results, who is thinking about the best outcome for your investors, such as a liquidity event? Who is actively developing the pipeline of potential acquirers? Who is thinking about how to achieve and maintain a readiness for a strong valuation? Or is thinking about how to avoid any operational decisions that will complicate a future due diligence process? Or is ensuring that you will have timely access to the necessary flow of capital? Or is helping to open senior executive level doors as you pursue business development opportunities? (You are not trying to do all of this yourself, are you?)
Having a working Board means that your Directors are actively contributing value between meetings and in areas that you the most need help with. And it means that during a Board meeting your Directors are also reporting on their achievement of their corporate development commitments. In other words, all parties are contributing to shareholder value and are accountable to each other for doing so.
Fourthly, if you want to attract the best of the best to your working Board, compensate them accordingly. I am not referring to insiders or investor representatives who are already compensated elsewhere, but to independent Directors that you need to attract in order to build the company that you envision.
Highly successful people think about opportunity cost. If you want to secure the services of highly engaged, experienced, skilled, and connected Directors, do not approach them as if you neither understand nor respect the value of what you are asking them for, as if you are somehow entitled to their pro bono support. Instead appreciate that you are competing against alternative uses for their valuable time and effort, and act accordingly.
In business, most people do not properly value what they do not properly pay for. As a rule, include a material cash component in any Independent Director package because “cash is king” and reflects the priority and value that you place on having a truly productive, working Board. If you do not, then what caliber of independent Director do you expect to attract?
And lastly, properly manage your Board! Think of your working Board as a new sports car that requires skill and attention to extract the performance it is capable of delivering. Fully exploit the opportunity presented to you by this collection of talent, experience, and connections. If you are willing to invest the necessary effort and resources to build a truly productive, contributory Board, you will greatly improve your odds of a successful outcome for your investors, company, and career.
And isn’t that what you really want?