ExpertCEO

Lyle Lovett has a line in a song: "She wasn't good, but she had good intentions." That might set the stage for this thread:

Having gone through two significant funding rounds, my board consists of VCs and an outside director. Practically all of them have a definitive tendency to get micro-focused, both in BOD meetings and in 1:1s. (To give a little flavor, it's not uncommon for them to rathole on a sub-topic like lead generation.)

I attribute this behavior partially to natural early-stage investor focus ... but it is also due to the junior nature of some of the directors. Plus, all too often their focus on managing their investment overshadows their broader responsibility as a director.

As we are beginning to scale our business, I want the board dialogue (and behaviors) to elevate as well. I'm looking for ideas on how to invoke and/or manage this desired change.

One opportunity I have is outside directors. I have room for two, but only one in place. I'm considering replacing him, and adding a second per our bylaws, selecting individuals who could help elevate the discussion.

Any thoughts on this challenge?

I have a couple of suggestions and I commend you for raising this issue which tells me you are focused on the right role for your Board even if some of your Directors are not. This is normally a problem when the Board members have some operating experience but little or no Board experience. So they fall back on what they know which is dealing with operational issues.

One possibility if they would support it is to have an outside "Board coach" attend a couple of your meetings and even run them. The right individual will not let the discussion get sidetracked on these things and can take the heat on this issue so you dont have to.

A second possibility which can go alongside the first is to make it a practice when the discussion is veering off the agenda to refer it to committee and ask the offenders if they would take the issue on offline and come back with a solution. They probably wont want to do this but it might cut off the trivial discussion.

It sounds like you do need a couple of new experienced Directors and I would opt for people with board experience in companies bigger than yours and public if possible. Be clear with them before asking them to join that you want them to help establish a new tone for Board meetings and make sure they are willing to take the lead on this. Just because they are experienced do not assume that that they will want to do this.

I am troubled by the comment that a couple of your Directors are supporting their agenda as investors instead of the company's. These should be the same, and if they are not you are headed for trouble. This might be worth a special meeting with a facilitator to get these issues on the table. I suspect you might not have as much of this if your Directors are senior partners with your VCs as opposed to junior ones, but it can happen with both.

Stay the course on this and upgrade your Board whenever you can. If and when trouble comes you will be glad you have experienced executives on the board who wont panic and push for a bad decision.

Good luck
Tom

I have had a number of Boards over the years. They have all been very different in terms of thier experience, competence, objectives and cultures. Faced with a similar situation I have done developed the following rules: 1) Speak to each Board member prior to the meeting to review the agenda, discuss key issues and set expectations--both of the Board member as well as the meeting in general. You, as CEO, have the right to expect certain things from both VC's and Directors. Most CEO's don't take this approach and the result is an agenda and meeting where nothing of substance is discussed. 2) Review with each Board member any topic that may take the discussion off track but is of particular interest to the board member--lead generation for example. In addition discuss decisions that need to be made at the board meeting. 3) Any business issue that will not be well received must be discussed prior. We know what those are:) 4) Control the discussion. Really control the discussion as it you would a staff meeting. (To do this effectively I always opt for a smaller board)

It is my strong belief that the actual Board meeting should be a formality to confirm prior conversations with the majority of time spent discussing topics of substance. Certainly there are situations where none of the above is possible because of the types of board members you have. In this case I keep them short while I look for the right board members.

Finally, I wouldn't look for other outside board members to elevate the conversation. That will come from you.

I have seen this many times. In my opinion, boards need to focus on four things in addition to results

1. Strategy
2. Capital Allocation
3. Management evaluation and accountability
4. Governance

If you have an adequately developed strategic plan (which I all too often find missing - which then leads to micromanagement), then they would spend most of their time on strategy and changes in strategy based on changes in strategic assumptions or the operating environment.

That being said, if you don't have experienced board members, you will fight an uphill battle. You must have a well-qualified CEO or two on your board as an outsider(s) to balance the financial focus on many VCs. The good VCs look for operators to get involved because they know they are experienced from a financial perspective but not from a strategy and operations perspective.

Great topic and anyone who quotes Lyle Lovett deserves a response!

Speaking as BOTH a former CEO and an investor, I highly recommend you add the two outside directors:

1) You are moving into a zone where operational and serious company scaling wisdom and experience are critical. Savvy current or former operators can bring balance to the board, and more importantly really help you scale the business, and better predict what’s around the next corner. They should also be valuable in recruiting and customer or partner access.

2) Board governance is no longer a joke. Its serious business and you need serious experienced people guiding you, and doing the job as judiciaries first, and investors second. Again, you are moving into a zone where this becomes ever more important each quarter.

3) I highly recommend one of the new outside directors meets the financial requirements for an audit committee chair.

4) If you continue to succeed, and an IPO is in your future, the VCs will bail quickly after the IPO -- it’s not what they are paid to do. You don’t want to be caught in a bad spot where you have to quickly hire directors.

One final thought -- the best board meetings (from the view of value to the CEO/leadership and the company) are ones that focus on strategic issues first, governance second, and operational details third. A couple of boards I'm on have a strategic topic or two set as the main agenda item. Operational metrics are provided for review, but are not presented -- there is a short session allotted for directors to ask any questions they may have related to the operational metrics. Boards are supposed to govern and guide the long-term focus and value of the company, not run the business.

Lead. Where you see a void in board meeting leadership, fill it. Design the perfect board meeting and figure out a way (if you are not Chair) to make it happen, using your position as CEO. You may not run every aspect of the meeting, but it is your duty to make sure the Board is informed about what you see as the critical elements of strategy. [I am not particularly qualified to answer this, just had an opinion].

There are a number of great inputs in this dialogue. The idea of trying to preempt a board’s tendency to step into the operational topics is one of the most common and time consuming issues a CEO deals with during board meetings.

In addition to some of the other great comments, I’ve had success in establishing better ground rules that come in the presentation of a summary overview of the “Board” role and 4 or 5 performance expectations. A few (there are many that could be used depending on the nature of your board) of the more important expectations should include:
• Preparation for the meeting
• Quality and relevance of the contributions during the meeting
• Ability to remain concise, objective, and constructive when commenting on the CEO’s efforts to date
• Ability to stay within the role of board member that you have published and received acknowledgement of ahead of time
Creating a short feedback mechanism (1 page evaluation tool) that is completed at the end of each meeting is key. This feedback is for your use. The directors will complete a short 4 or 5 question rating of “each” board member (all on the same page). This feedback can be used when talking to individual members 1:1 and puts everyone on notice that the quality of their conduct and performance is not only important but requisite for them while participating on “your” board.

Like some of the other contributors indicated, this all talks to the leadership you are willing to exercise in this setting and ultimately what you want to get out of your board.

Good luck.