Company boards can be daunting to the uninitiated. And startup lore is littered with stories the likes of Digg, whose board talked the founder out of a $60 million pay day. But especially for a new company, a board stocked with experienced directors can be a vital font of expertise, guidance and contacts. In a segment as fast moving as the startup space, a good board can be a critical comparative advantage – as long as you handle it right.
We consulted our panel of leading Australian entrepreneurs and investors to find out exactly how you should handle a board of directors. It all comes down to communication.
Ben Chong, partner at Right Click Capital and our first panelist, talks about creating the working relationship between the board and the executive. It’s all about collaboration. But creating an environment where founders can benefit from the experiences and contacts of board members, where board members can effectively look after shareholder interests, doesn’t happen organically. It’s a relationship that needs to be proactively established. Formalised even.
“It’s important for the relationship and responsibilities to clearly defined. How often should board meetings be held? How many hours should be allocated to a typical board meeting? What information should be prepared ahead of each board meeting? When will this information be distributed?” says Chong.
“In early stage companies, it’s helpful for founders to articulate their asks for the board over and above corporate governance. Are there particular introductions they’re seeking? Are there areas of the business where it’d be helpful for an experienced board member to provide input on?”
All of this means communication. And lots of it. Executives can’t be afraid to be forward about what’s happening and the company’s needs — the board may represent shareholders but they aren’t outsiders. They are a resource that should be tapped.
“In my experience, the ‘no surprises’ modus operandi works best. Board members don’t want to receive big surprises when they review board papers or sit around the board table. Similarly, founders should expect big surprises to be sprung on them the next time they’re at a board meeting,” says Chong.
“In my experience, this means founders need to manage expectations of their board through regular communication. Sometimes it’s an email update. At other times it’s a call. If there are difficult decisions that need be discussed at an upcoming board meeting, it’s helpful to talk through these things informally so that due consideration can be brought to bear at the board meeting.”
The importance of communication and limiting surprise was further compounded by the rest of the panel, with Blue Sky Ventures’ Elaine Stead saying “the biggest mistakes founders and executive make is waiting until the board meeting to raise issues.”
Muru-D’s Annie Parker suggests that if something doesn’t go to plan, “own up to it fast, don’t lie or try and hide it away. Firstly, it’ll destroy your credibility by not being honest and secondly, you limit the chance for your board to help you out.”
“You’ll be surprised at how many board members roll their sleeves up and pitch in when there’s a big problem – asking for help is not a sign of weakness.”
When you do approach your board, and hopefully you’ll do it often, go armed with the right knowledge. Tyson Hackwood, head of Asia for Braintree Payments, says its all about the facts. About proving that you know what you’re talking about, that you can back up what you say and do.
Boards want to know that you know your business, your industry and the direction you are going. Passion is great, but ‘feelings’ aren’t bankable, therefore the detail becomes important. The board wants to be reassured of the decisions you’re making. Make sure you communicate in a rational way with a focus on business and speak on their level with language that’s aligned to their specialties and understanding.
It is also key to remember that the board is often ‘liable’ for business, and therefore activity that could be considered ‘fun and guerrilla’ is actually ‘liability and exposure’. Added to that you not only need to know your industry, you need to know the ‘regulations associated too’, what is the direction and how that can impact growth.
Lastly, effective communication is about more than the style and content of what you’re saying. It can be easy to treat the board as a homogenous unit, rather than a collection of individuals with differing experiences, opinions and expectations. This is a pitfall that founders and executives should avoid. Instead, says Elaine Stead, approach board members individually. See how they react and take on their advice and assistance regularly.
“The Board needs to be managed, much like a team member might manage up – ideas, strategies or decisions you want to discuss at the Board level need to be socialized first,” says Stead.
“I see much more satisfactory outcomes when founders and executives discuss the concept with the board members first individually, as it allows the founder/executive to tailor or iterate the idea first based on feedback and then present it to the board which is largely already warmed up to or supportive of the concept.”
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