The art of board management is a skill that you need to master because it can mean your survival and at least greater leeway in managing your startup. The first issue is deciding when you need a board.
If you take outside investment, then you will have to create a board because your investors will want a say in how you manage the company. Even if they don’t, you should create a board when you accept other people’s money in order to establish high fiduciary standards.
The second issue is the composition of the board. Your major investors will require a board seat, so some choices are made for you. In general you need people with two kinds of expertise: company-building and deep market knowledge.
Here Are The Typical Roles That You Need To Fill:
- “Customer.” This person understands the needs of your customers. He doesn’t have to be a customer, but should understand what your market wants to buy.
- “Geek.” This person provides a reality check on your development efforts. For example, is your technology defying the laws of physics? Even if you don’t have a tech startup, the question remains the same: Is your task possible?
- “Dad.” Dad (or Mom) is the calming influence on the board. He brings a wealth of experience and maturity to help mediate issues and reach closure on problems.
- “Morpheus.” This is the same kind of tough guy mentioned before but who’s on your board. He tells you that you’re full of sushi when you’re lying. This person also pushes for totally legal and ethical practices.
- “Jerry Maguire.” This is “Mr. Connections.” His most important asset is his Rolodex of industry contacts and his willingness to let your startup use it.
The third issue is creating a good working relationship with your board members. You should hold monthly, or at least quarterly, board meetings. You may view this as a waste of time, but you need to establish an atmosphere of discipline and responsibility. The odds that you “don’t need oversight because you know what you’re doing and it’s “your” company are zero.
Here Are Some Tips:
- Save trees. Less paper is better than more paper. It is a mistake to bury your board in documentation because these are busy folks. Make your accounting and financial reports about five pages long. They should include a profit-and-loss statement, cash flow projections, your balance sheet, and a list of accomplishments and problems.
- Save time. The ideal length and frequency of board meetings is two to three hours once per month. You need to have your act together to make this work: reports prepared in advance, follow-up items from previous meetings locked and loaded, and a meeting, not socializing, mentality. If you want to socialize, check in with Foursquare some other time.
- Provide useful metrics. Accounting and financial reports aren’t sufficient. Non-financial metrics—such as the number of customers, number of installations, or number of visitors to your site—are equally important. This information should add no more than three to four pages to your reports.
- Do the easy stuff in advance. Board meetings are the time and place for discussing strategic issues—not for conveying the factual information contained in reports. You should spend little time in the meeting communicating the facts—and a lot of time figuring out how to improve them in the future. Thus, it’s useful to send your reports in advance. However, don’t assume that your directors will read them—you still need to review them in the meeting.
- Do the hard stuff in advance, too. The worst time and place to announce bad news is at a board meeting—unless you want a pack of hyenas tearing your flesh from your bones. When you have bad news, meet or speak privately with each member in advance and explain the circumstances. Ask for ideas about ways to fix the problem.
- Get feedback and sell your ideas in advance. The corollary of never surprising a board with bad news is to prepare board members well in advance of key decisions. If you know that you are going to discuss a major issue at an upcoming meeting, then talk to each member about it before the meeting. You might get feedback that will change your perspective about the decision.