Experienced startup leaders have learned the hard way: “Manager your board of directors – or it will manage you.
As soon as you have serious investors, they will require a seat on your board of directors. Then you, the founder CEO, have a new boss: The board of directors. Is that true or false?
True: The legal hierarchy places the board of directors above the Chief Executive Officer and reserves all rights except for those specifically delegated to the CEO in writing (the bylaws of the corporation). Thus, the CEO has to get prior permission to act on many more things than first-timers might expect.
False: The CEO is running the company, is expected to lead it to success (or ruin) and the power is in his hands. The bylaws delegate almost all the important power to the CEO. Thus, the CEO does what has to be done and informs the BOD after the fact.
One of your greatest resources can be your board of directors. Or it can be a source of stupidity and constant trouble for you. I watched often as Dick Kramlich, co-founder of iconic New Enterprise Association, brought CEOs access to a vast network of contacts. In addition Dick consistently demonstrated uncanny insight as I watched boards struggling with life or death strategic decisions for startups. And I recall how amazed I was the time the startup’s seed round angel investor, an MD brain surgeon, insisted on understanding how the microprocessors worked inside the computers the CEO had included in the annual budget that we were to approve that night. Argh!
The prime responsibility of the board members is to look out for the best interests of the shareholders of the startup. That usually is in concert with seeking to build an amazing new enterprise. But there are times when big encounters trigger opposite and very strong sides.
I’ve found those experienced with startup struggles focus on how to support the CEO and thus contribute to building an amazing business. They respect how tough a job it is to be a leader of a fledgling business. Others range from useless to destructive. I’ve been on boards in Silicon Valley where a single investor thought his every decision was brilliant – yet the opposite was painfully obvious to all but him. The CEO and the rest of us hoped he would never show up.
So be sure to start by picking your board members wisely. And use them well. Seek their wisdom and perspective. Treat them with respect. Learn how to get the best from them. When you do, your board meetings will be less fearful and more richly rewarding. If you don’t, you’ll dread attending the next board meeting. And you’ll miss the opportunity to recruit and put to work talented people who can do wonders building your startup, help execute your business plan, and enable you to anticipate and manage the big moments you are going to encounter.
I’ve found that managing the board of directors does not just happen. Nor is it done by investors or the independent person on your board. You – yes you – are the one who must do it. Your objective is to get the most out of your board: things that will help your startup prosper. A resourceful board can be one of the key elements of building your unfair competitive advantage. Managing it is what serial entrepreneurs have learned to do well.
I wish you The Best on your Adventure!