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Steps To Bringing In A Board Of Directors Into Your Company

One of the defining moments in the life of an early stage software organization is the creation of a board of directors. Usually, this occurs when the organization raises its first institutional round of financing. But I see no reason to wait for that to happen.

When you think about building your board, its best to begin with with a clear realization of the need. Don’t create a board if you aren’t in need of it. It is more likely that you do need it, but you don’t realize it. So let’s begin by discussing why you require a board.

A board of directors is a vehicle through which you can recruit tremendously gifted and experienced individuals who can add value by helping you make key decisions and ensure that you are implementing sound corporate governance. A good number of founders/CEOs are under the impression that a board is something that creates a lot of pointless work for them, adds little value, and is run by individuals who provide counterflow to the running the company. That can be true if you recruit bad board members. However, if you bring aboard great board members, expect to get get great value.

Establishing your board begins with the realization that you should bring on a board the way you would recruit employees. Start by defining your needs. One approach is to evaluate your existing skills as a founder/CEO (for more on that, read Mr. CEO, Would you Hire Yourself?). Then consider the skill sets you lack and where a mentor could help in the position of a board member (for example, if you’re weak in finance, a former CFO would be a good prospect). Next, evaluate your plans for growing the business and the role of a board member in presenting strategic opportunities for advancement, whether for financing or business development.

The next step would be to put together a role description. Again, treat hiring a board member just as you would treat hiring a senior executive. Making a list of the role description will help you target exactly what you’re searching for, and will make the recruitment process easier.

Set clear expectations of the role. When recruiting an employee, it’s its a clear cut case of bringing an individual for a full-time position. On the other hand, when recruiting a board member, placing your expectations on the time and energy commitment expected in the role is key. There are many people out there who get on boards, but have no time for it, or don’t prioritize the role high enough. You also need to be realistic in your expectations. For expansion stage software companies, a board member should allocate a minimum of one day a month. Four of those days a year are for board meetings. The rest are to be spent with you evaluating your operations, or assisting you by opening doors and enabling business.

Get help in recruiting. You probably can’t afford to employ a recruiter. But if you can, hire a recruiter. Again, this is a critical role. Recruiters can help you dramatically broaden the scope of your search to find the best candidate. In lieu of a recruiter, see if you can find someone experienced to help you. You can even recruit your lawyer or accountant. Essentially, you need an additional set of eyes to aid you in the process.

Be highly selective. There is nothing more detrimental than having a bad board member (same as hiring a bad employee). A detached board member is a waste of your time and energy. An excellent board member can provide you great value.

Put your board members to work. Board members should add value. However, they will only do so when you request them to. Always be looking for the next project for each and every board member. When you run out of things for them to do, it’s time to let them go.

Know when to let one of your board members go, and don’t wait too long to do it. Board members should bring value to you and your company. If they don’t, get rid of them, and replace them with those who do. You normally don’t have that kind of alternative with investor board members (although you may at your next round of financing). However, you certainly do when it comes to management board members (a co-founder that has outlived his/her tenure on the board); or independent board members.

Don’t create anything for the board that doesn’t add value to your business. Quite a few founders/CEOs bemoan board meetings because they believe the meetings suck up their time and bring no value. Well, that is one of the indicators of a bad board. Sort out the board first. Once you have a good board, make sure that whatever you create for the board (presentations, dashboard, etc.) are things you already make use of for your business.

Expose your board to the guts of the business. Board members can only be helpful if they fully grasp your market, your business and your operations. If you feel the urge to hide things from them, you have a bad board. If you don’t believe they can fully grasp your business, you have a bad board. Get rid of them and then recruit the right board. And then open up the guts of your business to them. Have your senior managers walk the board through every single function. Expose the problems that you struggle with. Then ask them to assist you in resolving them. If they can’t, fire them, and find members that can.

I hope this provides you some food for thought. For more, read A Balanced and Cohesive Board and The Board Imperative – Cause no Harm and Chairman of the Board Role and Compensation.

For more mentoring software CEO insights, visit OpenView Labs. OpenView Venture Partners is committed to helping expansion stage software companies develop into great big companies. Let us know what we could be doing to deliver on that promise.

Firas Raouf is a Venture Partner at OpenView.

 

Related articles

• 9 ways to attract world-class board members (venturebeat.com)
• Lucy P. Marcus: Boardroom Diversity Means Better Business (huffingtonpost.com)
• Even start-ups need a COO (venturebeat.com)
• Make Your Board Meetings Easy And Effective (dohertyassoc.com)

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