Are you getting value from every board member?
The composition of your Board and the appointments you make are crucial for your business. They are just as important as the hires for your executive team
As you grow, your Board will need to flex and evolve with your business. So you need some honest reflection and to answer the following crucial question:
- Is my Board's composition right at the moment and for our next stage of growth?
If not, how should it change as you grow, and what impact will that have on the control of the Board?
We help you answer these questions and provide some insight into how your board should be performing.
At this stage, the Board members will consist of a Founder-CEO, a Co-founder if there is one, a Chair, and representation from your investors. A maximum of three to four members, depending on your Chair's experience, quality, background and the level of investment raised, you may be able to have a Board with the co-founders and Chair at this stage.
Series A Investment and Beyond
As the next phase of investment is raised, representation from your new investors will often require a position on the Board.
Undertaking a review and skills audit of your current Board, evaluating the critical skills and needs of the Board to deliver for the next 18 months of growth, is valuable at this stage. It will help to agree with your investors in advance what the shape of the Board will ideally look like post-investment.
You want to make sure that you have a competent, independent viewpoint on the Board, ideally in your Chair. While investor representation can provide valuable input, it will come from an investor perspective.
Ideally, you'll jointly decide with your investors the best skills required to create real value for the company in these roles and together recruit these positions rather than have anyone appointed.
Remember, these Directors have a fiduciary duty to act in the company's best interests and it's stakeholders, whether or not this is in the investor's best interests.
This can become overly complicated without the proper forethought and planning from you and your investors. Early investors can be reluctant to release Board seats. Alternatively, the mix of new investors may be reluctant to collaborate with what they see as an unnecessarily enlarged group of investors. These sorts of complications can slow you down rather than accelerate growth with clarity and decisive action.
Ensuring your investors are aligned with the Vision and Values of the company at this stage cannot be understated. Without this, you are buying into a rocky and challenging ride at best.
The investment you attract will increase significantly with each subsequent round and, with it, the balance of power will shift. You and your company will transition from founder controlled to investor controlled. It can be a brutal reality to accept if you haven't prepared for this mentally,
Crucially, it is vital you appoint experienced people to your executive team who will ideally have scaled a business significantly or been through an exit and can add valuable insight at a strategic and Board level.
You will more than likely have been through considerable change in both the composition and shape of your Exec team before you reach significant levels of investment. It will have become apparent that you and the company need different skills and abilities in this exec team at each stage of growth.
Initially, when hiring your first few exec team members, there was probably a feeling of relief, of being able to recruit experts in their field and delegating key business areas.
You possibly assumed they'd take you all the way, but that's now given way to the reality that the skill and attributes this team have may not satisfy the needs of the business in the future.
What got you to £1m in revenue won't get you to £10m or £50m in revenue. So it's essential to approach the recruitment and development of your Exec team differently at each stage.
You need to be comfortable to layer in the right people with the right skills for the future who can lead existing teams and allow those early hires to learn more than they could imagine in the right setting.
This Exec Team will have experience at Board level, adding significant value with probably one or two having Board seats with others contributing regularly.
Running an Effective Board
You must see your board meeting as an opportunity. When you get to the point when it seems like a chore, or you feel like you're turning up to get your homework marked, it's time to take stock and look at why.
Your board meeting may not be overly formal in the early stages, although they are no less important and need to be documented. However, when significant investment is involved, the board meetings need to take a more formal approach.
Every board meeting needs to have a strategic focus. You will be working towards your next key inflexion point; to get to breakeven; secure your next investment round, or be working towards an exit. Each will have a map of critical milestones that you need to achieve.
Running an effective board meeting as CEO is all about preparation. While the Chair leads the board meetings, you will work together on the direction; the agenda-setting and agree on the desired outcomes.
You will want to create an annual board calendar and may wish to develop a yearly board agenda in advance to review each significant business area strategically.
Board packs should be prepared and sent out to members in good time for review, ideally a week in advance if you want to engage the best from your talented NXDs. This information should then inform the discussion; there is absolutely no value in reading through the board packs during the meeting.
Board meetings shouldn't become a showcase for investors either. There is nothing worse than going through the motions to satisfy your investors. If they are experienced enough and fully invested in your company, they will expect far more than a showcase.
There is a good approach proposed by Jon Callaghan, the Managing Partner at True Ventures. He suggests that the meeting cover the three main points of his board triangle.
Focusing the discussion around these three elements with strategy as the starting point ensures that the board meetings address the business's critical aspects and don't get dragged down into minutia.
Keeping it high level, you want to address a maximum of three strategic issues in your board meeting and call upon the Board's expertise to do so. Tackling too many will take too long, and you will not benefit from the Board full attention.
A few questions you might want to pose in order to prepare for this:
- What are your key strategic challenges?
- Where can our Board add real value?
- Where are you stuck?
- What don't you know that you don't know?
- What can't you see coming over the horizon?
The board meetings are a real opportunity to learn through listening and understanding. Don't just turn up to advocate for or defend your position; use the time to explore together to make transformative decisions for your business.
Nobody wants to get bogged down in spreadsheet after spreadsheet of reports. This is not a good use of your Board's time. However, they need to be fully informed and kept abreast of progress.
It is your job as CEO to provide a concise set of reports with commentary around the figures and ensure the Board can attend the meeting prepared to comment on the performance, rather than try to understand it.
Your Board reporting should also consider a forward-looking approach. Your financial reporting is a rear view mirror that you can do nothing to change at this stage, often called lag measures, as the time to impact them has passed.
Good diligence around these is required without going down rabbit holes on something you can no longer impact.
Your business will have some key levers which it can influence and manoeuvre to impact your financial results. Ideally limited in number but with a significant impact on the financial performance of your business, these measures should be used to enable course correction and impact directly on the results of the company.
Your Chair also plays a key role here in making sure you aren't distracted by any board members' pet area of concern which adds no value but takes valuable team time in preparation.
The board table is an excellent opportunity for you and your team to develop your leadership skills. Inviting your management team to join Board Meetings and learn from the experience around the table will make a massive difference to the skills in the business beyond the Exec team.
Inviting your board members to engage with your team and share why they want to be part of the Board and your journey can also hugely motivate your team, particularly during challenging times where the road seems increasingly steep.
So when it comes to your Board, there is a lot to consider at every stage of your progress. Recruitment is just as important for your Board as it is with your team, and finding the right individuals who can challenge you and support you in equal measure is vital.
Don't just bring friendly faces onto the Board; while it might give you some support in the often lonely position of CEO, the lack of objectivity will only hamper your business.
Finally, just as with your team, keep assessing and reviewing the value of your board meetings and make sure your business is benefiting from what should be the considerable experience around the table.
Plan with your Chair how and at what frequency you will conduct Board Reviews; these should be welcomed and encouraged, allowing for honest and robust conversations for the benefit of the business.
If you are starting to review your board and would like an informal discussion with the Gearing For Growth team, please get in touch online or send us an enquiry, we’d love to hear from you.
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