The transition from the startup to the expansion stage often signals significant changes across the entirety of an organization, and the board room is no exception. By this point many software companies have accepted a round (or two) of venture capital or outside financing, and that invariably leads to the Board of Directors becoming a more formalized and structured function. That’s ultimately a good thing in many ways. A Board of Directors can play an incredibly impactful role in the development and growth of a business (see some great examples how here). But it can also introduce new challenges if you get unlucky, or go about it the wrong way. A haphazardly assembled, misaligned, and non-transparent Board of Directors can play an equally impactful role in the development and growth of your business — but not in a good way.
Symptoms You’re Suffering from Poor Board Cohesion
While an expansion stage board’s skill sets, backgrounds, and levels of experience will obviously vary, it’s absolutely critical that every member is focused on — and committed to — achieving a shared set of key corporate objectives. For that to happen, each board member must trust that their individual interests are recognized and represented, and that everyone’s perspective and opinion are valued. Unfortunately, that doesn’t always happen, and you may find yourself noticing two symptoms of poor board cohesion:
- Board meetings go over time and don’t result in clear conclusions and alignment
- One or two members overpower other members and overly influence the agenda
Those might not seem like uncommon board issues, but if they’re left unacknowledged or unresolved they can have lasting effects on board productivity, management team focus, and overall company performance.
A perfect example of this — though it comes from a larger company — is Hewlett-Packard, which dealt with a board spying scandal and, ultimately, a total board overhaul last year. Company performance, innovation, and brand perception suffered significantly because of it, and HP is still in the process of recovering.
Of course, cohesion is a non-issue if you recruit the right board members in the first place. If every member is aligned around a similar set of goals, priorities, and motivations, and feels like their individual interests are represented, it’s far more likely that cohesion will take care of itself. Management board members will feel respected and valued by their investor directors; investor directors will feel that company managers are listening and being held accountable; and independent board members will feel empowered to keep the board in balance. If an expansion stage board can create that level of trust, then high impact will follow. If it can’t, the board will struggle to achieve anything meaningful.
A Lack of Clarity: Symptoms and Negative Impact
Think back to your last board meeting. Did it end with a clear list of action items and an agreed-upon plan for the next month or quarter? Or did it end with insufficient decisions, no clear list of priorities for driving the company’s key goals or objectives, and differing board member perspectives that resulted in more arguments than recommendations? If your board meetings look more like the latter, then you’ve got a problem.
Ultimately, it’s the job of an expansion-stage CEO to ensure that there is extreme clarity on the decisions that the management team is looking for the board to approve. The CEO is also responsible for driving the agenda that would incorporate the review of the decisions and how they were derived.
In order to create that level of clarity, executives should send board meeting materials to board members a few days before the meeting, and plan to have one-on-one calls with each board member to discuss the materials and the decisions that need to be made. This will allow you to provide context, react to questions, and deliver additional information before small questions and issues blow up into board member fisticuffs. Ultimately, your goal should be to achieve alignment (to the extent possible) prior to the board meeting. This way, the decisions being made at the meeting become formalities.
The Secret to Effective Boards (and Board Meetings): Assemble a Dream Team
Like an expansion stage management team, there’s much more to assembling a board than simply appointing company co-founders and recruiting the most high profile former executives or brand name investors you can find. While there are specific board seats that every company needs to fill (investor seats, management seats, and independent seats), the actual board roles you recruit should be dictated by your company’s biggest skills gaps and needs. Which is why, as Brad Feld wrote in a post on his blog, it’s so critical to perform a gap analysis before taking any steps toward building an expansion-stage board. You must be able to pinpoint the skills you have, understand the skills you need, and identify the skills you could benefit from the most long-term. Without that information, you’ll end up blindly recruiting board members that may or may not deliver real value to the company. Ultimately, the key takeaway here is to spend the appropriate amount of time constructing your board initially. Otherwise, you’ll spend an inordinate and unnecessary amount of time deconstructing and reconstructing it later.