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All CEOs Should Be An Outside Director For One Company

This week I had two meetings with CEOs of companies we’ve recently invested in where the question of “what is an ideal board meeting” came up. I’m writing an entire book on it called Startup Boards: Reinventing the Board of Directors to Better Support the Entrepreneur so it’s easy for me to define my ideal board meeting at this point since my head is pretty deep into it intellectually.

One of the things I always suggest to CEOs is that they be an outside director for one company that is not their own. I don’t care how big or small the company is, whether or not I have an involvement in the company, or if the CEO knows the entrepreneurs involved. I’m much more interested in the CEO having the experience of being a board member for someone else’s company.

Being CEO of a fast growing startup is a tough job. There are awesome days, dismal days, and lots of in-between days. I’ve never been in a startup that was a straight line of progress over time and I’ve never worked with a CEO who didn’t regularly learn new things, have stuff not work, and go through stretches of huge uncertainty and struggle.

Given that I am no longer a CEO (although I was once – for seven years) I don’t feel the pressure of being CEO. As a result I’ve spent a lot of the past 17 years being able to provide perspective for the CEOs I work with. Even when I’m deeply invested in the company, I can be emotionally and functionally detached from the pressure and dynamics of what the CEO is going through on a daily basis while still understanding the issues since I’ve had the experience.

Now, imagine you are a CEO of a fast growing startup. Wouldn’t it be awesome to be able to spend a small amount of your time in that same emotional and functional detachment for someone else’s company? Not only would it stretch some new muscles for you, it’d give you a much broader perspective on how “the job of a CEO” works. You might have new empathy for a CEO, which could include self-empathy (since you are also a CEO) – which is a tough concept for some, but is fundamentally about understanding yourself better, especially when you are under emotional distress of some sort. You’d have empathy for other board members and would either appreciate your own board members more, or learn tools and approaches to develop a more effective relationship with them, or decide you need different ones.

There are lots of other subtle benefits. You’ll extend your network. You’ll view a company from a different vantage point. You’ll be on the other side of the financing discussions (a board member, rather than the CEO). You’ll understand “fiduciary responsibility” more deeply. You’ll have a peer relationship with another CEO that you have a vested interest in that crosses over to a board – CEO relationship. You’ll get exposed to new management styles. You’ll experience different conflicts that you won’t have the same type of pressure from. The list goes on and on.

I usually recommend only one outside board. Not two, not three – just one. Any more than one is too many – as an active CEO you just won’t have time to be serious and deliberate about it. While you might feel like you have capacity for more, your company needs your attention first. There are exceptions, especially with serial entrepreneurs who have a unique relationship with an investor where it’s a deeper, collaborative relationship across multiple companies (I have a few of these), but generally one is plenty.

I don’t count non-profit boards in this mix. Do as much non-profit stuff as you want. The dynamics, incentives, motivations, and things you’ll learn and experience are totally different. That’s not what this is about.

If you are a CEO of a startup company and you aren’t on one other board as an outside director, think hard about doing it. And, if you are in my world and aren’t on an outside board, holler if you want my help getting you connected up with some folks.

August 4th, 2012     Categories: Board of Directors     Tags: , , ,
Brad Feld

Hi, I'm Brad Feld, a managing director at Foundry Group who lives in Boulder, Colorado. I invest in software and Internet companies around the US, run marathons and read a lot.

 
 
 
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