Boards, what are they good for?

Four times a year, executive teams scramble to prepare themselves for the quarterly board meeting. This simple gathering can take dozens of hours to prepare for leaders of a company.  The tradition has become routine and its importance unquestioned. I want to ask if we can make this process better. 

A small disclaimer, I’m not an expert on boards. I’ve served on a few boards of small companies and nonprofits. In my line of work, I also deal with many boards and see how our customers interact & engage with them. Even with this small sample size, a few patterns have kept repeating themselves. My goal is to call out what I see as improvements.

The bad

Boards have been around for a while. Corporate governance by a representative board is a reflection of political practices dating back to the late Middle Ages. The board’s role is to protect the rights of the shareholders. Its long history has created many different ways of running a board (which isn’t a bad thing) but led to an overly important sense of decorum. The main issues I’ve seen are: 

  • Not talking about the important stuff: Many boards resemble sales pitches from the management team. Akin to a business development meeting where everything is hunky dory and there are no storm clouds at all. 
  • Onerous documentation: Documents are also too long to follow. A plethora of financials, strategic plans and other paperwork fill up the board’s members inboxes and often mix up what the real priorities are.
  • Lack of strategic insight: The role of the board should be to help with important decisions (M&A, strategy, exec team hiring/firing, fund raising, etc). Oftentimes, the issues debated are minor in importance. At the same time, board members can be disconnected from the reality of the business. They are selected because of their track record and network but often fail to grasp core fundamentals of the business they are trying to help. Advice can be too theoretical and impractical. This isn’t a knock on board members but rather the ones that don’t do the work to properly understand what’s going on. 
  • Lack of diversity: The challenge of diversity has been well documented. Older white men make up the majority of boards and diverse opinions are not heard.

What is the job to be done?

The board’s ultimate responsibility to increase *shareholder value* and these days stakeholder value (which is an entirely different post). Boards are elected by the people that own the company and are meant to look after their interests. They provide help in two big ways. 

The ability  to hire and fire the CEO as well as provide strong governance on important decisions. I’ll focus on the latter; making better decisions. 

An important question is why are the meetings only once a quarter? Why not monthly? Why not every two years? If a board is to help with key decisions, I believe that sticking to a quarterly structure is incongruent where a company needs to be constantly adapting to the market. In the old world of waterfall development, this made sense. In today’s, companies are responding much quicker to the market. Increasingly, strategic decisions are being made every week or month rather than at the solemn quarterly meeting. In order for a board to be able to accelerate the velocity of an organization, there needs to be a faster pace. Engaging with the board needs to be done on a continuous basis.  

A key aspect of helping with important decisions is also taking advantage of the board member’s network. Senior board members don’t have answers to every single problem a company is facing but most likely know people that have gone through a similar experience. Using this pattern recognition can be very helpful for an executive team facing a big decision. 

Caring and getting along

Ultimately, a board member is there to help and their own self-image is reflected in the success of the organization. A board should be comprised of people that care about the company and that get along with each other. Getting along sounds a bit quaint but is actually super important. When there are tough calls to make, there needs to be an underlying level of trust and camaraderie. It’s much easier for the right decision to be made when people get along, especially during tough times. 

Resources

Here are some great resources I found while researching this post

Managing your startup board by Mark Suster

The art of board leadership by Mike Volpi

Designing the Ideal Board Meeting Series by Seth Levine

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