« swipe left for tags/categories
swipe right to go back »
Over the past year, I’ve been systematically trying to change the way the board meetings work for the companies that I’m on the boards of. I’ve done a bunch of experiments and continue to learn what works and what doesn’t work.
Ever since I started investing in the mid-1990′s I’ve been exposed to a concept called “board observer rights.” When we did investments at Mobius Venture Capital, in addition to a board seat, we always got board observer rights. This was a way for us to bring another person to the board meeting other than the board member (usually an associate or a principal but sometimes another partner), or have someone sit in for the board member if the board member wasn’t available.
Early in the life of a company, this often seems manageable. But after several rounds of financings with new investors, I’ve often found myself in board meetings with ten or more people. I think the most I’ve ever seen was about 25 people in the room for a board that had five board members. As you’d expect, there was very little critical thinking or real discussion in these board meetings; instead, the management team just presented to the mass of people in the room. And, in this context, the board members rarely formed a tight and effective working relationship.
Over the last few years, I’ve become very anti-board observer. I’ve been on several boards where the CEO didn’t allow board observers in the meeting. I’ve been on several boards where there were observers in the room, but they weren’t allowed to sit at the board table and could only “observe”. In both cases, the quality and level of discussion in the board meeting was dramatically higher.
I’ve come to believe that formal board observer rights shouldn’t exist. Instead, they should be voluntary and controlled by the CEO. In some cases, the CEO will want observers at the meeting; in other cases he won’t. But it should be up to him.
The best board meetings I’ve been at have been ones that only have the board members and select participants from the management team in the room. Casual discussion, either through dinner the night before or lunch after the board meeting, with an extended group including people from the management team and any other investors, is an effective way to engage everyone else. But the 25 person board meeting is rarely effective.
Over the past two years I’ve been struggling mightily with the dynamics of “classical VC funded board of directors” and how these boards work. When I hear a VC say “I’m an active board member” it gives me the same nauseous feeling I get when someone says “I’m a value added investor.” I’ve been on some awesome boards, some terrible boards, and everything in between. Today, I refuse to be on a shitty or dysfunctional board and I’m proud that every board I’m on is one that I’d consider to be effective, although they all operate in different ways.
I’ve experimented with a bunch of different approaches across a lot of boards and have been thinking hard about this lately. I’m working on a book called Startup Boards with Mahendra Ramsinghani and have done some interviews about this topic lately, including a chaotic one the other day with James Geshwiler on the Frank Peters Show.
My long term friend Matt Blumberg (Return Path CEO) and I were going back and forth about his recently board meeting (which ironically I missed) and he wrote some kind words about me and his other board members (Fred Wilson – USV, Greg Sands – Sutter Hill, Scott Weiss – A16Z, and Scott Petry – Authentic8.) I asked him if he’d write a guest post about what makes an awesome board member. He was willing – it follows.
I’ve written a bunch of posts over the years about how I manage my Board at Return Path. And I think part of having awesome Board members is managing them well – giving transparent information, well organized, with enough lead time before a meeting; running great and engaging meetings; mixing social time with business time; and being a Board member yourself at some other organization so you see the other side of the equation. All those topics are covered in more detail in the following posts: Why I Love My Board, Part II, The Good, The Board, and The Ugly, and Powerpointless.
But by far the best way to make sure you have an awesome board is to start by having awesome Board members. I’ve had about 15 Board members over the years, some far better than others. Here are my top 5 things that make an awesome Board member, and my interview/vetting process for Board members.
Top 5 things that make an awesome Board member:
- They are prepared and keep commitments: They show up to all meetings. They show up on time and don’t leave early. They do their homework. The are fully present and don’t do email during meetings.
- They speak their minds: They have no fear of bringing up an uncomfortable topic during a meeting, even if it impacts someone in the room. They do not come up to you after a meeting and tell you what they really think. I had a Board member once tell my entire management team that he thought I needed to be better at firing executives more quickly!
- They build independent relationships: They get to know each other and see each other outside of your meetings. They get to know individuals on your management team and talk to them on occasion as well. None of this communication goes through you.
- They are resource rich: I’ve had some directors who are one-trick or two-trick ponies with their advice. After their third or fourth meeting, they have nothing new to add. Board members should be able to pull from years of experience and adapt that experience to your situations on a flexible and dynamic basis.
- They are strategically engaged but operationally distant: This may vary by stage of company and the needs of your own team, but I find that even Board members who are talented operators have a hard time parachuting into any given situation and being super useful. Getting their operational help requires a lot of regular engagement on a specific issue or area. But they must be strategically engaged and understand the fundamental dynamics and drivers of your business – economics, competition, ecosystem, and the like.
My interview/vetting process for Board members:
- Take the process as seriously as you take building your executive team – both in terms of your time and in terms of how you think about the overall composition of the Board, not just a given Board member.
- Source broadly, get a lot of referrals from disparate sources, reach high.
- Interview many people, always face to face and usually multiple times for finalists. Also for finalists, have a few other Board members conduct interviews as well.
- Check references thoroughly and across a few different vectors.
- Have a finalist or two attend a Board meeting so you and they can examine the fit firsthand. Give the prospective Board member extra time to read materials and offer your time to answer questions before the meeting. You’ll get a good first-hand sense of a lot of the above Top 5 items this way.
- Have no fear of rejecting them. Even if you like them. Even if they are a stretch and someone you consider to be a business hero or mentor. Even after you’ve already put them on the Board (and yes, even if they’re a VC). This is your inner circle, and getting this group right is one of the most important things you can do for your company.
I asked my exec team for their own take on what makes an awesome Board member. Here are some quick snippets from them where they didn’t overlap with mine:
- Ethical and high integrity in their own jobs and lives
- Comes with an opinion
- Thinking about what will happen next in the business and getting management to think ahead
- Call out your blind spots
- Remembering to thank you and calling out what’s right
- Role modeling for your expectations of your own management team
- Do your prep, show up, be fully engaged, be brilliant/transparent/critical/constructive and creative. Then get out of our way
- Offer tough love…Unfettered, constructive guidance – not just what we want to hear
- Pattern matching: they have an ability to map a situation we have to a problem/solution at other companies that they’ve been involved in – we learn from their experience…but ability and willingness to do more than just pattern matching. To really get into the essence of the issues and help give strategic guidance and suggestions
- Ability to down 2 Shake Shack milkshakes in one sitting
- Colorful and unique metaphors
Disclaimer – I run a private company. While I’m sure a lot of these things are true for other types of organizations (public companies, non-profits, associations, etc.), the answers may vary. And even within the realm of private companies, you need to have a Board that fits your style as a CEO and your company’s culture. That said, the formula above has worked well for me, and if nothing else, is somewhat time tested at this point!
I had two similar experiences last week where I heard from employees of two different companies that I’m on the board of. In each case, a senior exec said something like “I heard the board wants us to do blah.”
I was in each board meeting and the board most definitely did not say “we want the company to do blah.” Rather, in each case there was a discussion about the topic in question. In one of the cases consensus was reached quickly; in the other there was a robust discussion since two of the board members disagreed and the CEO wasn’t sure what he wanted to do. Ultimately in that case as well there was consensus.
In each case I asked the executive what he’d heard back from the CEO. I got two versions of “the board had a discussion, there was a lot of disagreement, but the board wanted us to do blah.” I then asked, as non-politically as I could, “Do you think CEO wants to do that?” In both cases, the answer was “I’m not sure, but he knows the board wants that.”
I think this is a brutal communication mistake on the part of each of the CEOs. I’ve seen this many times over the past sixteen years since I stopped being a CEO and started being a board member. In each case the CEO is abdicating some responsibility for the decision. In the worst situation, the CEO is blaming the board for a decision and ultimately setting up a very negative context if the decision is an incorrect one – as in “see – I didn’t want to do this but the board did – so it’s not my fault.”
I’ve come to believe that the only real operating decision that a board makes is to fire the CEO. Sure, the board – and individual board members – are often involved in many operational decisions, but the ultimate decision is (and should be) the CEO’s. If the CEO is not in a position to be the ultimate decision maker, he shouldn’t be the CEO. And if board members don’t trust the CEO to make the decision, they should take one of two actions available to them – leave the board or replace the CEO.
In one of the cases, I asked the executive “if I told you the CEO was strongly in favor of the decision, would that impact you.” The response was a simple one: “yes – I’d be much more motivated to make sure we did it right.” I smiled and reinforced that the CEO was in fact supportive, which I think was a relief (and motivator) to this particular executive.
In my leadership experience, people really value when a leader takes responsibility for a decision, even if it turns out to be an incorrect one. CEO’s – don’t be the guy who says “the board made me do it.”
I’ve been involved in helping start a number of non-profits. One of them – National Center for Women & Information Technology – has surpassed my wildest expectations. Lucy Sanders and her team have done an awesome job of building a coalition of over 170 prominent corporations, academic institutions, government agencies, and nonprofits working to improve U.S. innovation, competitiveness, and workforce sustainability by increasing women’s participation in IT.
I’ve been chairman of NCWIT since its early days. As with most of the non-profits I’ve been involved in helping start, the board of directors evolves over time. Unlike for-profit companies, each stage feels like a step function as you add new board members who bring a new set of capabilities, range, and diversity to the board.
Stage 1 for NCWIT’s board was a group of early board members who simply helped get things going. There was a lot of evangelism for NCWIT, a lot of ad hoc help, and plenty of ambiguity about roles and responsibilities. The board members were extremely enthusiastic and supportive – we wouldn’t have made much progress without them.
Stage 2 for NCWIT’s board was an effort to build some formality into the board. We included several members from our larger investment partners, a handful of folks that played specific functional roles, and began to organize around a set of board committees. Some of these committees were effective; some weren’t. The consistency of board communication increased and while there was still plenty of ad hoc activity, in general things were more organized.
Stage 3 for NCWIT’s board has just been launched. We just announced the appointment of eight new board members.
- Thaddeus Arroyo, Chief Information Officer, AT&T Services, Inc.
- Phillip Bond, President and Chief Executive Officer, Information Technology Association of America (ITAA)
- Dr. Rodney Brooks, Founder, Heartland Robotics, Inc. and iRobot Corp., and the Panasonic Professor of Robotics at Massachusetts Institute of Technology (MIT)
- Lisa Brummel, Senior Vice President of Human Resources, Microsoft
- Carol Mosely, Senior Vice President of Information Systems, Wal-Mart Stores, Inc.
- Nancy Phillips, Chief Operating Officer and Co-founder, ViaWest
- Merle Waterman, Chief Financial Officer, OneRiot
- Emily White, Senior Director, Asia Pacific and Latin America Online Sales and Operations, Google
It’s an incredible set of people that cross the boundaries between entrepreneurship, academia, and established technology companies. They are joining a well established board that has a great working tempo. I’m really psyched about the next stage of NCWIT.