What’s The Board Got To Do With It?

An in-depth look into the relationship dynamics between boards and founders From achieving product-market fit to getting your first users, the playbook has been written over and over again for starting a company. There is more than enough essays, blogs and books out there on what the early stages of a company looks like. However, where should a founder go if her company has reached all the early milestones? What should she read if her company has entered growth stage? Today’s blog looks into what does board to CEO/Founder interactions look like. As companies enter growth stage, Yet there is little literature out there on how founders should set up their boards, best practices, and what constructive board interactions look like. their boards take on critical roles for the survival of the company. After hitting a dead end in trying to find research, I decided the next best avenue was go straight to the people themselves. I conducted interviews with various founders and board members ranging from non-profits in education, private equity owned companies, biotech firms, and a recently acquired consumer goods company. While the spectrum of industries, company sizes, and legal structure all differed, the sentiments echoed by all the interviewees were remarkably similar. Below are the questions I asked and my findings in demystifying board to CEO/Founder interactions. How did you set up your board? I came in with the assumption that most founders had no say with who came on to their board but that was far from the case. Every founder I spoke with was very adamant about controlling as many board seats as possible, and often, they did pick the majority of their board members. When companies did take on outside investment which required giving up a board seat, founders said it’s a conversation who comes on the board. It’s not a dictatorship. That’s not going to happen if they’re barging in and doing what they want without taking into account the goals of the CEO. Investors require the trust of CEOs. However, as a CEO, you have to be crystal clear on what you want. This situation is where some CEOs fumbled in the initial stages. In the conversation with the non-profit founder, he mentioned that he set up the board very hastily in the beginning. He didn’t know what particular skill set he needed from them. This move, while helping his company grow very quickly in the early stages, led to some growing pains down the line. Therefore, it’s important to know early what role you want the board to play in your company and what expertise you’d like to see on there. One board member I spoke with was very adamant that the role of the board is not to operate the company. That’s the CEO’s job. The board is there for governance and to plan for the future of the company. They need to know what happens on day 1 of year 6 once the 5-year plan is over. Otherwise, the board has failed. Have a clear idea of idea of what you want your board members to do. Whether it’s fiduciary responsibilities, strategic decision making, compensation guidance, fundraising and capital allocation, field expertise or network connections, it’s important to know what role you want the board playing. Additionally, do not compromise on who you bring onto the board. As one founder mentioned, “You can’t exactly fire them.” Therefore, founders suggested a heavy vetting process and building relationships with people before you ask them to join your board. This last analogy given by a founder probably best answers the question I asked. Me: “How did you set up your board?” Him: “How do porcupines mate? Very carefully.” Ultimately, be very selective with who you bring to help your company as you’re growing. This decision will carry great consequences down the road. How often do you communicate and what do those interactions look like? Across the board, everyone communicated at a minimum, once a month. This interaction usually came in the form of a monthly update email which every founder/CEO I talked to sent to their respective board members. This email usually consisted of major accomplishments or projects happening, financial statement updates if it was relevant, and some sort of ask, be it advice to a specific question or an introduction needed. Short and sweet emails were the name of the game. Some CEOs and board members interacted even more frequently at once a week over text or email for ad hoc questions. Younger boards also tended to interact more frequently with their CEO as they were still developing the relationship and needed more guidance and help with major governance decisions. Most companies would hold quarterly board meetings. Everyone highly stressed the importance of creating an agenda, sending it before the meeting, and following it closely during the meeting itself. A word of wisdom was creating a pre-reading packet for board members to give them updates about all the major financials and progress the company had made. This packet assured that the board meeting could be more focused towards action-orientated and decision making activities instead of reciting numbers. In terms of interactions, everyone stressed the importance of creating a partnership between the CEO and the board, not a hierarchal relationship. Interactions have to be built on collaboration, trust, confidence in the other person’s abilities, and creating space for clear and constructive feedback. However, how did this partnership manifest if there is an overriding power dynamic where the board is the CEO’s boss? What is the power dynamic like between boards and CEOs? The founders of the private for-profit companies mentioned that they have to be aware that their incentives and goals for the company differ from those of the board. CEOs are tasked with execution. Boards are tasked with governance and ownership. Even though both have the goal of achieving long-term shareholder value, they may perceive how to achieve them differently. Thus, both these founders emphasized how their board views decisions. empathy and understanding Interestingly, the board members I spoke with heavily emphasized the importance of partnership. One said, “if there’s a power dynamic, there’s a problem.” Boards need trusting, cohesive relationships with their CEOs. They need to be able to say, “We trust you Ms. CEO, until you prove us otherwise.” Authoritative relationships would disempower the CEO from doing their job. Thus, the board members firmly believed that if members do not support their CEO, they should not be on the board. The partnering approach is more constructive and beneficial for the company. Thus, while titles indicate a power dynamic, good board-CEO relationships do not let the dynamic manifest. If board members have come on due to an investment, then CEO’s hold their money and determine whether the venture capitalists see a return on their investment. One founder brought up the point that the power dynamic is not a one way street as it may appear. Thus, it’s not the case of boards telling founders what to do. It’s a team effort. If they’re able to do that, they directly benefit. The board’s priority is to have the CEO and her management team excited and producing results. The non-profit founders echoed the collaborative sentiment. However, in two cases, the non-profit CEOs were also heads of their boards which they were beginning to find problematic. As much as they believed in the importance of collaboration and trust, Because they were the heads of their board, they often received more cheerleading and support than critical, constructive feedback. This led to costly decisions that could’ve been avoided if the board voiced their concerns more deliberately and were not in a position of telling both their board head and CEO what to do. they wanted more pushback from their boards. However, it’s important to not let a power dynamic take hold. Rather, it should be a partnership based on trust, respect, collaboration, clear expectations of the roles of both parties, and space for constructive feedback. Therefore, separation is crucial between a CEO and a board. How do you navigate differences in opinions or tensions between you and your board/CEO? Everyone I spoke with emphasized that the process of conflict resolution is very human. They all agreed that one has to come to disagreements with honesty, an open ear and communicate well with each other. Additionally, they viewed disagreements as opportunities to flesh out and understand where each party was coming from. Active listening was mentioned by everyone. One board member highlighted that people need to make it about the process and not take differences in opinions personally. He encouraged the use of research and facts in order to avoid letting emotions cloud judgment or severe the relationship between CEOs and their board members. At the end of the day, everyone is human. On a more practical note, one founder recommended If they bring the decision up for the first time in a meeting, it’s more likely to be shot down. having 1-on-1 conversations with board members before the board meeting if they wanted to suggest a big decision. 1-on-1 conversations allow for more constructive feedback without the onslaught of multiple members attacking an idea. He also noted that differences in opinions will happen. It’s important to pick your battles, prioritize carefully, and be pragmatic about what you want to pursue and what you can let go of. Navigating differences can be emotionally exhausting, thus you have to know what’s worth fighting for and what isn’t. One CEO echoed this sentiment and added on that This helps him keep the meeting moving and actually make decisions instead of turning the meeting into a giant debate. providing multiple options to his board helps him navigate differences. Ultimately differences in opinion will occur. Yet, for the most part, the members and founders I’ve spoken with all stated that their general vision and goals have aligned with their respective boards. Therefore, it’s important to constantly be in communication, actively listen to where everyone is coming from, and not let emotions cloud your judgment. However, if that isn’t the case, chances are someone will be forced out. You have to trust that everyone is there with the right intentions for the company. What does your communication style look like in these interactions? How has it changed? Everyone’s communication style centered on listening. One founder of a non-profit said, “Talk less, listen more.” Active listening was a skill that everyone encouraged developing. Founders emphasized making sure that you let the board members know you’re hearing them. On top of active listening, one board member recommended coming into conversations without any presumptions and with curiosity. He stated the importance of creating an open atmosphere where people could feel like they could ask clarifying questions without judgment. Trust was another important component to good communication. The CEO of a non-profit emphasized trusting that everyone in the room has the right intentions, and that they’ve done the pre-reading before hand. Without trust, he firmly believed that good communication could not take place. Finally, good communication entails constructive feedback. One board member mentioned how in his early days, he was more authoritative, critical not constructive, and had less tolerance for mistakes. Over time, he’s developed more patience, objectivity, and is more constructive with the feedback he provides. Good feedback centers on active listening, having empathy for the individual you’re speaking to, and asking a lot of clarifying questions so the individual doesn’t feel like you’re attacking them. You want it to be a conversation. One founder though had an important point to make. While the foundation of good communication lies in active listening, trust, and constructive feedback, he noted that you’re still dealing with humans who are subject to emotional responses in different circumstances. Thus, if the company is doing well, the board is excited and they’re easier to communicate with. Conversely, if the company is going through hardship, the board maybe more tense, anxious and harder to communicate with. It is important to be aware how fluxes can affect the people on your board and manage for that. What are the pros and cons of having a board? Or the challenges and benefits? One founder of a non-profit went so far as to state that there are no cons to having a board. He also runs a 501c3 organization though so by law, he is required to have a board. With that being said, this founder said that his company’s mission is to help children and that can only be done with the help of others. His board is the first ripple in impacting millions of lives. Boards provide wisdom, different perspectives, experience, expertise, connections and guidance to founders who may not have all the required knowledge. Many founders highlighted the benefit of having a braintrust of incredibly smart people to help make decisions. Many founders said they went to their board for help with hiring and compensation decisions, for fundraising help and investor introductions, and for help in determining the future direction of their company. As a result of all these perspectives, founders are able to make better decisions for their companies. Founders also found an unexpected benefit in having a governing board be a backstop for hard or bold decisions. They were glad that there was a group of people who could keep them in check and make sure they were being responsible and using resources wisely. Another pro of having a board was having a group of people that were solely dedicated to the future vision of the company. A couple CEOs mentioned that their day-to-day task was operating the company and making sure they were meeting quarterly goals. They liked the fact that they could trust a group of people to make the larger, strategic decisions as it allowed them to focus on operating the company. Along with that idea, bringing on investors as board members allows for them to become more invested in the company and the management team. One founder said this was beneficial when he needed specific expertise and fundraising connections. Having that individual on his board made the introduction easier. However, there are still challenges to having a board. While all the CEOs and founders I talked to found great benefit in having a board, one board member I spoke to mentioned that founders don’t always want boards. Thus, there is a hostile relationship when that founder takes on investment and is forced to have board members against their choosing. Hostile relationships don’t make for good founder-board relationships. One board member mentioned that younger board members may feel like they have something to prove so they do not approach board meetings with a partnership and collaborative mindset. Next, it can become hard to manage multiple personalities on a board. Additionally, in the case with investment partners, the member who wrote a bigger cheque may feel more entitled to have a bigger say even though every board member has equal say. You want board members who are complimentary to each other from a functional and expertise standpoint, but also in personalities. Thus, managing egos can be difficult for board members and CEOs alike. One CEO mentioned it can be emotionally exhausting to oversee a group of people who are used to being right all the time. Another CEO echoed that sentiment. He also said that the boards job is to find weaknesses in his company before he does. While this benefits the company as a whole, it’s not always fun to be the person taking in that feedback and seeing what mistakes you’re making. Thus, how one gives feedback is important to maintain a positive and constructive relationship. Two of the non-profit founders mentioned that it can be hard to select the right person. There is a lot of pre-vetting involved, talking to multiple references, making sure they’re clear about the expectations of the role and seeing if there is cultural fit existing board members. They both suggested bringing potential board members into a meeting and asking them what they thought, how they interacted, what they would do differently, and what ideas they had. They try to be as rigorous as possible as if they were hiring a new employee. They emphasized new founders doing this because you can’t just fire a board member when you feel like it. A few founders mentioned that while not necessarily a bad thing, having a board in place means you can’t do whatever you want. While this is good for the overall benefit of the company, some founders noted that it can make some decisions move more slowly. You’re subject to a greater system of checks and balances, and your ideas are questioned more deeply. Finally, one board member mentioned that while respectful relationships are necessary, Members should not take sides with the CEO, and they should not protect the CEO from critical and constructive feedback. board members should not necessarily be best friends with their founders/CEOs. Having an overly friendly relationship clouds everyone’s judgment and removes the objectivity needed for a constructive founder-board relationship. What have you learned along the way and what would you do differently? He said that 80% of the time, boards should be focused on the future and 20% of the time, the day-to-day running of the company. One board member emphasized the importance of making sure boards are focused on the future direction of the company. Another board member had a recommendation for future founders. When asked why, he stated that it creates better objectivity in the group, it gives the CEO a point person to go to, to get an understanding of the board’s feelings, and provides a more objective agenda to follow that outlines all the priorities of the board and CEO. He suggested that CEOs should not be the chairman of the board and there should a non-executive chairman for the board who creates the agenda. Amongst the founders, everyone learned to become better active listeners and to have more trust with their board. Thus, the vetting and selection process of board members became incredibly important. They also understood that it was their job to set the tone and culture of the board. Founders emphasized how important it is to know exactly what you want from a board member, and to be scary explicit with those expectations to potential board candidates. Founders should be proactive about how the board members can best serve the company. Additionally, founders should build relationships with these people before they ask them to be on the board. A few other board creation recommendations were This makes sure that members are more aligned with your ideas for the company, and you can facilitate better interactions. keeping the board small in order to facilitate better conversation. Control as many board seats as you can and give them out instead of having investors negotiate for them. Consider what sort of connections and expertise they can bring as well. For example, having a lawyer on the board is incredibly useful and cost-effective compared to hiring an outside law firm. Having diversity in the board will only make the company better. Have diversity early on in terms of perspectives, experiences, backgrounds, etc. Additionally, one founder highly recommended having board members who were previous founders as they’ll have a greater level of empathy from having been in the founder shoes. In the boardroom, don’t take things personally. Use logic, research and facts to guide your thinking. Also come to the room with options so if the board starts shooting down your ideas, you’re prepared. The more you look at something, the uglier it looks. Don’t get too caught up in a detail if it’s not moving the needle. Finally, create an environment that is conducive to constructive feedback. Make sure you’re listening and acknowledging everyone’s opinion. Yet, have agency and control the room. Keep to the agenda. Be confident in yourself and remember that the board is there to help you, not disempower you. Thanks for reading! Hope you enjoyed getting to learn a little more about founder-board interactions. A special thank you to Deb Mills-Scofield, Liz Malone, Scott Norton, Susie Schub, Alan Harlam, Steve Haynes, Khalil Fuller, Ralph Acosta, and David Flink for their help and insights :)