Dear founder, you have done all the following hard work:
- Get out of your comfort zone to start a company
- Put in all the hours needed to find your first customers / users, build your team, get some seed or early stage money, design your product or service
- You have now started growing your business
- You have a business model that seems to generate cash, and may be if you are lucky even some profits
- You decide that the world is your oyster and you will take on a big round of financing or bring in some executives to help you grow even faster or heck, even manage your growth rate
- You have been at the business for 4+ years, and you feel you are just getting started. You feel your vision is beckoning, and you are just scratching the surface of the dent you and your organisation plan to leave
Great story. There is only 1 problem. It does not end well most times from point 6. Mind you, the story could have ended in point 2, but you are awesome. You are in the 4% of all startups founded that makes it this far. The question that is left is if you are in the 0.4% category that makes it bigger, scales into a market leader and creates the actual dent you dream about. Or as most companies in this phase, are you going to be in not fun zombie land before you move on to greener pastures?
Now, there are many reasons that most companies don’t make it to dream land. But I will focus on an often missed point — how you manage your board. I did this presentation to our group of scale ups from Nordic Scalers recently and got really good feedback that this topic is seldom touched upon.
Most entrepreneur CEOs in this scale up phase are just expected to know this stuff — if you have made it this far, you must figure this out right? No. Wrong. This is some weird expectations on a founder CEO who is somehow managing to get their business running.
#1 — Why do you even have a board?
For most venture funded companies, this is obvious. But considering that most SME’s don’t take in much external funding, this is an important question to answer. I believe advisory boards are great where you get away from the admin and oversight to provide you high degrees of freedom to run your operations, while you get insight, experience and wisdom at a small price.
But lets focus this question on companies that need to have a board.
The board plays a key control function to make sure money is well spent and shareholders are well represented. While it is rare that the entrepreneur takes the money and runs, it is more common unfortunately that most companies do not create value for shareholders to feel their cents are going to come back as big dollars. So the board plays oversight, control and makes sure the company follows the plans presented.
#2 — How do most board meetings feel like?
I met Drew Houston from Dropbox many years ago. He mentioned that at Dropbox they call the actual board “The Circus” where no decisions happen. They are there for formality, admin and massaging egos. The real board meeting is a tighter team of hand picked investors whose opinion the founders really value. I am sure lots has changed at Dropbox since those early days. But still, it represents how most board meetings do actually work.
#3 — Why do most board setups go wrong?
The biggest reason is board members playing school principal to the founders who simply seem to not get along anymore. While most entrepreneurs think investors “don’t get it”, the truth is most founding teams have issues as they grow really fast. High stress, anxiety in strategy and not meeting targets naturally don’t play well in these scenarios. And most of the times, a high growth company is still trying to figure out tweaks to their business model to generate more growth or margin, or figuring out how to conquer new markets or find organizational design that fits their working style. All these are costly to fail with, takes time, money and drains resources. Not least from the board too.
Five principles that have served me well
Principle 1: Size & Cadence Matter
The obvious is how big your board is. I recommend to keep it less than 10 people including the founding team. Having boards of 12+ people is just a circus and an utter waste of time. I recommend scale ups we work with to have a board of 6–7 including themselves. As you grow and take in more investors, this becomes quite complex, but I will come back to that.
Regarding cadence — if you are a well oiled machine, the board is more supervisory and hence every 3rd month is good. If you are just starting to get the bearings of your growth, then every 4th-8th week is good cadence.
Principle 2: Zero Surprises
The biggest rule I recommend in the board meeting is that “No decisions are made there”. All decisions have already happened prior to the meeting. You have done 1–1 calls with the people on the board, gotten their feedback, buy-in, comments. You simply use the board meeting to relay what has been agreed and to capture final nuances. If things to waiver away during the meeting, you do not start negotiating on the spot, but instead capture the fears and wishes, and get back to them 1–1. I know it takes more time and is more tedious, but I have never seen on the spot arguments ever becoming productive. I have seen expert CEOs and founders being blindsided by issues, lose their bearings or temper and that becomes a big black mark on the founder, which board members are happy to exploit at a later stage. Your guard is up if you see a surprise coming. You are confident, assertive and open, but guard up.
Principle 3: Managing your stakeholders
If you have a premier VC partner, the chances are that he/she is spending as much time finding the next unicorn as much as they are trying to give you 30 minute slots to dial in. Respect their choices, but make it clear that you prefer meeting face to face. Be open to moving your board meeting to a venue that gets the premier partner to come. Don’t underestimate the social part of going out for dinners, or finding joint ways to get out of the board room context. You discover more of the people and yourself in this process. If you have VC’s dialing in, give them the floor space for some time so they feel listened to, and give them the option to hang up and catch up with the meeting minutes afterwards. Avoid having many dialing in at the same time, hoping everyone is listening intently to your 70 page strategy presentation. That is a pipe dream.
Principle 4 — Decide what is Strategy, and what is Admin
Make sure you get the hierarchy of your issues right. What is critical for everyone to know; what is critical for everyone to feel they have contributed; what is critical for you to get input on.
Most founders seem to confuse the importance of hierarchical thinking. Wherein, the highest point in your hierarchy deserves the most attention. In my world this is either an objective (e.g. Launch in x markets by Q2) or challenge (German regulations are making everything slower) or key results (e.g. 10,000 new users by Q2, off target by 20%, which them loops you back into the challenge i.e. why is that so) It is seldom activities (e.g. Need to find an agency in Germany to do our advertising). If your board starts looking at all your activities and having views on them randomly, you get into my idea is better than yours, which seldom ends well for you as the CEO.
Principle 5 — Time Boxing your meetings
Finally, 2–3 hours is a good amount of time for such meetings. Do all the analysis etc before hand so you have material ready to show and paint the different scenarios. There is always a talker in boards that likes to monopolize the air space. Your job is to moderate, make sure you stick to the time while the person feels heard. This is such a hard balance. In scenarios where you feel they are not controllable, the only option I see is to give the person feedback that you respect their views, but would rather take it 1–1 or before the meetings so they know you take them seriously.
Finally, you are in love with your company, while investors are in love to make their returns and raise an even bigger fund. If you pick and manage your board, you become a better CEO and leader your company deserves.