The Board Of Directors: Board Chemistry
One of the least discussed elements of a Board of Directors is the chemistry among the Board members. It is critical to a well functioning Board but not always considered in Board construction.
Like a well functioning startup or a top flight sports team, the chemistry between the participants on a Board must be strong. That doesn't mean they need to be best friends who hang out with each other outside of the job. It does mean they must respect each other and lean on each other's strengths to get to the right decisions.
When you are building a Board, you must think about chemistry as much as you think about it when you hire a team. You want to have a Board that can work well together.
And you need to invest in chemistry after you've assembled your Board. I like regular Board dinners before or after the meetings. There is nothing like breaking bread and having a beer or a glass of wine to get folks to relax and connect. I also like annual Board offsites where the group spends an entire 24 hours together, usually talking about and plotting strategy for the coming year(s). These activities outside of the Board room are critical to developing and investing in Board chemistry. Once obtained, you cannot let Board chemistry calcify. You must continue to invest in it for the long haul.
Sometimes you will have a Director (or two) that just doesn't fit in. Unless that Director has a contractual right to their seat (usually as a result of investment) or brings a critically important skill set to the Board, you should seek to remove that person from the Board and replace them with someone with similar skills who will fit in better.
Even when an investor has a contractual right to a Board seat, you can get one of their partners to replace them in an effort to get better Board chemistry. Don't take this approach lightly however. It will be seen as a hostile move by the person you are seeking to replace. I have been involved in these situations a few times and it must be handled delicately, usually via the senior partner of the firm involved. If the person who is serving on your board that you are seeking to replace is the senior partner of the firm involved, then you have an even more difficult problem.
If there is one point that I want to drive home more than any other point in this entire series on Boards, it is that your company needs a strong Board and you must do everything in your power to make sure you get one. Don't accept that you have a dysfunctional Board and you have to live with it. If you have a bunch of investors on your Board that you can't get rid of, seek to add a bunch of independents to balance them out. And then build chemistry between the independents and the investors.
Group dynamics are an interesting thing. Adding or subtracting one or two people from a five to seven person group can dramatically change the chemistry. So pick your Board members wisely and if you have an issue, deal with it to the best of your powers.
I think Matt Blumberg, CEO of our portfolio company Return Path, has done an incredible job in developing Board chemistry. He has removed and replaced a number of Board members over the years, including an investor director. He invests heavily and continuously in Board chemistry. And he has assembled a set of strong personalities with very diverse strengths (and weaknesses) and he gets more out of us that I could possibly imagine. He should write a book on this topic.
I bring up Matt and his success as a way to suggest that seeking advice and counsel from other entrepreneurs and CEOs can be a good way to think about how to improve your own Board. And you might want to consider some of them for independent Board members while you are at it.
Your company is going to have a Board. It should not be an afterthought. It needs to be well constructed, well managed, and it needs to function easily and efficiently with strong chemistry. When you achieve all of those things, you will see that a great Board is a tremendous asset to a company, and you should pat yourself on the back for doing something that very few manage to accomplish.
Comments (Archived):
Great points. You underscore one of the fundamentals I repeat often: It’s all about relationships.How well we live, love, and work together is directly proportional to the relationships we build.
Will this series address boards where there isn’t any (or any significant) outside investment? For a big company example, Mike Bloomberg owns 85% of Bloomberg LP, but it still has a board. I’m wondering also about entrepreneurs with smaller startups that eschewed outside investment but still have boards for advisory purposes.
Great point.I think of BOD and boards of advisors as two completely different things. Legally and well as how they are structured.
I too would be very interested in this. How would you go about building a board without an investor base? I have a few friends who have done this, but the boards seem to be less formal and therefore not as valuable.
Great idea Dave. I will need a guest post for that since i don’t have experience with this situation. I would love to have the Mayor write it but I suspect he has more pressing responsibilities. I will ask around.
The US is awash in sole proprietorships, Sub-chapter S corporations, and LLCs with no Boards. And there are some C-corporations where the founder remains 100% in control. So these businesses do not have Boards in control.Some such businesses are quite successful. There is, e.g., just to pick a name at random with relatively high business worth per employee, just for a random pick, say, USV. Gee, how could any business, e.g., USV, even hope to be successful without a Board?Gee, for a business, any business, how could it hope to be successful without the CEO spending at least 25% of his time working on Board chemistry and keeping a rare, “gold” COB? Spending that 25% of the time on just the boring business — what a bummer!Without a Board, a CEO can’t even hope to be another Bethlehem Steel, AT&T, GM, DEC, Enron, American Motors, Burroughs!I can’t forget my main physics professor’s description of chemistry: “A pot of sticky goo here. A pot of smelly goo over there. Stirring all those sticky, smelly pots of goo.”
Yes, the CEO’s role is to build that chemistry, especially at the beginning. It’s the CEO’s role to establish some common grounds/linkages between the various members so that there is immediate respect for one another and so they can hit the ground running, working for you. I recently put 2 of my advisors in the same room for the first time, and spent the first 3 minutes doing my own intro about each of them emphasizing the points in their backgrounds where there was a common bridge, but also where their background and experiences came from. We had a great brainstorming session as if they had known each other for a long time.
What do you Do to build chemistry w/ your team members, WIlliam? As I observe our CEO, I see a lot of his job is building consensus and fostering the culture the executive team wants. So now I’m curious to see how other CEOs are doing that.
Again Fred, right on the money. I call it board room dynamics; the ability the group to at in a constructive manner to be a strategic asset to the company. Transcending individual positions in favor of adding real value. One other great board group activity is to attend trade shows. No better way to see how your company presents itself to buyers, partners, gain an appreciation of competition, and see industry positioning.
Ooh. What a great idea on trade shows.
“Chemistry” a word that pops up in this post, in any post about building a company, a start up, or a team. It is a critical “mind set” and it is a mind set as it is more an art than a science, and its a critical aspect of leadership.
Connections one2one or one2many are really at the core of everything. True in life. True in business.
It is critical. I think we know when we have chemistry, but it is sometimes hard to define and to construct — which is probably one of the reasons you say it is more art than science. I do think that some factors that create chemistry are trust and respect and a commitment to truth, and common interests and values. The commitment to truth keeps it from getting syrupy and useless.
Thanks as always, Fred. This is hard work, but there are few things more important to get right, and more helpful when you get it right (and more painful when it’s off). I’d also add that a CEO and management team can do a lot to promote good Board chemistry by managing the Board effectively. Boards with great chemistry potential might never realize that potential if they just sit in meetings and listen to management broadcasting reams of information at them. The chemistry comes to life when there is meaty conversation, actively facilitated.
Hi Matt,I recall you wrote a post on your blog about the hard work in recruiting and selecting Board members. It seems like it may be similar to recruiting and hiring some of the senior people on your team.Hopefully you can write a guest post for this series.#ImportantStuff
Happy to if asked. :-)But yes, recruiting Board members deserved as much time and attention as recruiting senior executives.As does Onboarding. Most people overlook onboarding as a critical business function for execs. It’s critical. And it’s equally critical for new Board members.
I second that motion.
Something I vaguely notice:Every time someones mentions you, they mention your investment into people in some way shape or form. Its a great quality to be known for, and more than a tad unusual.
That last point is so important
Great post, love this line: “Don’t accept that you have a dysfunctional Board and you have to live with it.”
What are your thoughts on board meetings over skype / videoconference for companies that may have 2 locations (R&D, Sales) or investors/board members living abroad
I don’t love these. They can work periodically, but they shouldn’t be the norm. I’d insist on at least three or four meetings per year being in person, including a meal. If you have more meetings than that, you can make the other ones call or video easily enough.
I think I recall a Fred post saying he was at one of the Return Path BOD dinners when news of Steve Jobs death came across twitter. It must of been an special moment.
It was a moment for sure
Someone who cannot commit to and make that commitment good to actually attend a Board scheduled meeting — should not be on the Board unless his wife is having twins.
Its necessary but not sufficient. You must get the entire Board face to face several times a year.
This was a great post and series, thanks.Getting the founder to see value with an “independent” Board is not easy. Most guys reluctantly accept criticism and are not too open about where they are screwing up. But, if you can get over the hump with them they will usually buy in big time.
This series, and this post in particular, has been fantastic. Questions and discussions about boards are ones that arise all the time in our business school classes, so it’s always great to lean on takeaways from Fred’s blog. Thanks!
Amen. So many folks miss the opportunity to have the board as positive contributing part of the company building process and mistake the board as something the “have to report to”. Management should view the board, and most meeting, as a net positive and a reason to focus on the key metrics of the business. All of that boiles down to having the right folks in the room. This core of governance is consistently underestimated by many entrepreneurs. Gregg FreishtatCEO, Scribit
Possible understatement;”If the person who is serving on your board that you are seeking to replace is the senior partner of the firm involved, then you have an even more difficult problem.”Choose wisely – chicken or egg. Is there a strategy that says you try and select/specif who the investor / director is at the onset…..or are some companies so eager to get funded that they accept/the partner that sponsored the deal. It seems like you get a free trial to see what the chemistry is like during the due diligence courting process.
Oh yeah. If someone is an idiot during due diligence they will be more of an idiot when they are on the BOD.
Picking the person who will serve on the board is a huge part of the financing process and most entrepreneurs dont focus on it enough
Fred, in another life I worked at a VC firm (back office), we had a valuation committee.My sense was that the valuation committee functioned a little like a BOD.
Great series. Thank you, Fred.
I agree that good Board chemistry is essential, but it’s equally important to be wary of group think. It’s easy to have good chemistry when everyone has a similar background and worldview; much harder when there’s genuine diversity (intellectual and otherwise). I’ve found that a wide range of perspectives and experiences can help avoid falling into traps that are otherwise common (and therefore invisible) to a particular industry or practice.
The key is to foster productive conflict. You have to create a safe space for this built on an atmosphere of trust.
Love that mentality of setting up the atmosphere of trust, Matt. Here is a question for you: How can I as mid-level person with a growing body of business experience in my field get on a for-profit board? This is a real question – I truly need to know. How can I over, say, the next five years, position myself to get some board experience?
Start w/ non-profits. Easy to get on and teaching the same lessons perhaps made more intense by their fragility.Network w/ folks who are on for profit Boards. Hang w/ them.Master the working of Boards and commit it to writing so you become a subject expert — even if only to you. Know the issues. Learn the landscape.Did you know the capitals of Iraq, Afghanistan and Pakistan before we went to war there?Identify what discrete skills you will bring to a Board. Really sweat this.Build up a set of exemplars of Board charters, committee charters and other governance docs.Identify companies within 25 miles from home — small companies, not Microsoft — and make contact.After you have built these relationships, ask directly.The biggest secret we ever learn in business is to ask for a favor.
Great answer from a superstar. Thanks.
Favors whether asked for or suggested can be game-changers. It’s all about timing.
As always, thanks for your insight JLM. I have also wondered about this process and the best way forward.
So much easier to ask for the sale, the job, etc. than asking for a favor. I imagine that I am not the only one for which this is a serious downfall. Caveat: Asking for favors on behalf of others comes much easier!
The easiest way to make a friend — ask for a favor and then thank them. Now you owe them and they will make a relationship to ensure they collect.
i can see it now.”Dear JLM”
What was the most productive conflict you’ve been in…
Seems like that fostering of productive (positive) conflict would be one of the hardest things to pull off…and recognizing the difference between healthy and unhealthy friction.Seems like some sort of balancing act is needed.
it’s equally important to be wary of group think. It’s easy to have good chemistry when everyone has a similar background and worldview; much harder when there’s genuine diversity (intellectual and otherwise).Agree and I was wondering about that as well because Fred said:”Like a well functioning startup or a top flight sports team, the chemistry between the participants on a Board must be strong. That doesn’t mean they need to be best friends who hang out with each other outside of the job. It does mean they must respect each other and lean on each other’s strengths to get to the right decisions.”A sports team (or work team) is different (sorry not my specialty for sure) because agreement of the team is essential. But in a situation of oversight I would think you want a more conflict and people not feeling as if they are going to create a problem with a friend by taking an opposite position. I was thinking that if any two people on a board were “best friends” or even just “friends” that would potentially create an issue with being afraid to go against what a friend’s point of view was. I mean by human dynamics it certainly makes sense that that would happen. While the saying “keep your friends close and your enemies closer” may be viewed as a movie cliche I’ve always found it to be true and very helpful.In a perfect world this could be avoided (two totally reasonable people who respect each others positions and encourage the truth) but how likely is that?
Yup
If you specifically de-bias decision making (McKinsey wrote a good article on this recently), then the risk of group think goes down a bit.Group think is really dangerous.
I think this is a great strategy if your Board owns > 50% of your company and/or you are completely beholden to them (e.g., rent-a-CEO vs. founder). But if they are smaller shareholders, this ‘overvalues’ the Board in terms of the CEO’s time. A full day of strategy sessions with folks who don’t understand the details of the company? Great if you need more of their capital. But if you don’t … it’s a huge time sink … spend the day with your management team instead and make sure the Board has an awesome pack sent to them 3+ days before the meeting …
Depends on who is on your board.
We think in prose and we dream in poetry.This is one your very best and most insightful blog posts — EVER.Poetry, Gunga Din. There is nothing more important than chemistry.”But when it comes to slaughter You will do your work on water,An’ you’ll lick the bloomin’ boots of ‘im that’s got it.”
thank you
This feels so far way, yet is exciting. Still grasping for the right ways to move forward.
Beyond the usual “head of board” “ceo” – how do you know what role to play to make chemistry work – How do you know if you are the instigator or the peacemaker or when you have to be both. or neither.
Inherently, this registers very strongly. You are speaking of board chemistry in terms of the board’s effectiveness and productivity, but isn’t it also a factor that can affect the individual board member’s commitment and enthusiasm? The length of my tenure on one nonprofit board was to some extent influenced by the chemistry and the stimulation experienced as a result.I know that some people have already touched on this, but the healthy friction on the board is part of what made it so stimulating and productive, as did the balance of personalities and strengths. Very strong personalities on that particular board. Much of our cohesiveness was due to the skill of the chair and the respect we had for him. There were times when he had to reign us in.
I’m all for strong personalities expect when they want to bend reality to their own interpretation. Then other people start to waver about what they are seeing.
Interesting read, thanks. Something that is not directly related to board chemistry but that actually feeds it and nurture it is information.If the CEO invests time in sending news regularly about the company (monthly in my view), he will greatly facilitate board chemistry. So, when the board meets, they will bring much more value to the table because they are more knowledgeable and they will go the extra mile to give help because they will have somehow lived the venture.Here also, content is king 🙂
“big like” – they need a button for that, eh?
I like big likes!
Really big Like button
@ccrystle:disqus is just getting some big likes for the big like, too! It’s a vicious circle of big likes 😉
Likes have a multifaceted purpose, Charlie.It’s voting with our fingertips.
and I cannot lie… and you other brothers can’t deny…