If you’re in growth mode, there’s a good chance that you have or will end up
with a board of directors. If you keep your business closely held, you may
decide to appoint a board. If you take outside equity financing, merge with an
established company or go public, you will get a board of directors as a
necessary part of the transaction.
For many entrepreneurs, working with a board is a constant source of
frustration and misunderstanding. Stories abound about entrepreneurs forced to
follow advice they don’t agree with, and distracted from their business to
manage their board members' egos and personalities. Sometimes, the entrepreneur
even gets replaced.
Cautious entrepreneurs often keep board members at arms' length and attempt
to hide company information from them. To complicate matters, when entrepreneurs
begin working with boards, they are rarely given advice on how to manage board
relations successfully. Trial and error tends to be the most common training
program.
As the founder of a consulting services company, I worked with CEOs and board
members for more than a decade, and I saw board relationships that ranged from
simpatico to antagonistic. I’ve also seen a number of CEOs lose their jobs
because of poor board relations. What's frustrating is how preventable many of
those disputes are.
Based on my work as a leadership coach, I’ve distilled the best practices for
great board relations and included them here. If you follow these guidelines,
you can make yourself look like a seasoned CEO no matter your experience level,
and you'll keep your board working with you instead of against you.
Pay attention to how you show up as a leader to your board. For most
CEOs, meetings and one-on-one board interactions are the most common places for
board members to see you in action as a leader. They use that time to evaluate
you and make projections about how you are in front of employees and
stakeholders. Do not underestimate the impact of your presence. If you are
chronically late, rushed and seem nervous, it’s natural to assume that you may
be disorganized or unsure of yourself in general. In every interaction with your
board, show your best face. If you have weaknesses in presentation skills or
leadership presence, work with a coach to correct them.
Assume a stance that your board members are trusted advisors. Board
members live in a netherworld between owner and advisor. However, they are not
your bosses. They look to you to call the shots and to show that you can take
and integrate sound feedback. View your board members as experts whose advice
you seek and trust, but don’t accept their suggestions blindly. If you disagree,
explain your logic and let them know the thought process for your decision.
Avoid surprises at all costs. Nothing erodes trust in a CEO like
surprises at the board level. If there’s bad news or a pending problem, let your
board know. This includes key customer complaints, staffing issues, cash-flow
problems--anything that can have a major effect on the company’s performance.
Letting your board know the bad with the good shows that you see the company
clearly and can manage pitfalls. Here’s the key, though: When you deliver bad
news, you also have to show how you plan to fix the problem.
Frame each board meeting with advance communications. Along the same
theme of avoiding surprises, give your board members a heads up before the board
meeting on what you plan to cover. Send each board member a packet three to five
business days before the meeting and personally call each member to let him or
her know the highlights of what will be covered. This is also the time to
provide advance notice about any brewing problems, get feedback on your proposed
solution, draw attention to areas in which you're seeking expertise, and provide
a framework for the board meeting. It also helps prepare you for any issues
board members might be planning to address.
Establish a consistent board meeting flow. Boards like a structured
meeting format and may require their own unique reporting tools. The key is to
ask what they want to hear and get into a regular delivery pattern for every
meeting. Each should be structured relatively the same. You might even ask for a
sample board packet from a board member’s company for ideas.
Here are some general rules: If you have a four-hour board meeting, prepare
no more than two hours of content to leave plenty of room for discussion. A
typical agenda might be:
1. Company overview with successes and challenges
2. Financial performance
3. Update on functional areas
4. Key open items for discussion.
Use board meetings for strategic discussion, not lecture. Deliver on
the areas mentioned above, but don’t spend the meeting reading. Board members
can read the fine print beforehand, so spend the meeting highlighting specific
points you want to cover. The goal should be to guide board members through what
they need to know, and to inform the strategic discussion.
Lean on your individual board members regularly for their expertise.
Board members bring expertise to the table and, equally important, a third-party
perspective. Use your board members regularly outside the boardroom when you
need another opinion or for ideas.
Many CEOs feel that asking for advice signals weakness, but the reverse is
true. Board members often comment that the CEOs who need them the most call them
the least. Inexperienced leaders may try to keep board members away rather than
realize that they need to use every resource at their disposal. Seasoned CEOs
are confident in their strengths yet will display weakness for the sake of
improving. So when you’re stuck on how to set up a sales commission structure,
hire a CFO or lease a new office space, think of your board as a go-to source.
The board-CEO relationship is one of the most misunderstood, mishandled--and
yet important--relationships a business can have. That's partly because
entrepreneurs don’t think about board relations until they have to or unless
there’s a problem. If managed strategically, however, board relations don’t have
to be unfriendly. In fact, they can be an enormous source of information and
competitive advantage.