Last month we held the 5th annual Icehouse Ventures First Cut Challenge - our nationwide search for New Zealand’s most promising young founders.
Over the past 3 years I have been fortunate to see five boards working in practice, one as member of the management team and the rest as an observer. Alongside that, every entrepreneur we invest in talks about their board: there is good, there is bad, and every one has some ugly.
"I’m unhappy with my board" - Every Founder, ever.
Boards, and their members, are put up on pedestals where success or failure is attributed directly to them. It is a flaw of our community to overvalue boards, neglecting teams, timing, markets, product and everything else that goes into a startup's success. This can lead to entrepreneurs, in their first board environment, underwhelmed that they aren't the superheroes they're made out to be... They're human, without infinite answers, connections or time.
Boards, by design, are a step removed from the day-to-day and, in part, are there to hold a CEO and her team to account. This means every CEO will spend as much time educating her board as she will receiving guidance, connections and value from them. It will feel repetitive and at times uncomfortably challenging, but it is not only worth it, it's vital. Why? It's hard to step back from within a business and see beyond the immediate challenges, and it's equally easy for "advisors" to have opinions without responsibility for their outcomes. Boards are in the unique position to balance these and provide unique value.
So they're neither superheroes nor a waste of time?
Do not treat board meetings as a CEO performance review: If a board acts as if they're only there to challenge and hold management to account, they're not aligned to creating value. If there is a genuine performance issue, that is important to address whenever it arises and most likely on a 1:1 basis between Chair & CEO. Waiting for a board meeting, the precious few hours you're all together to share expertise and address strategic issues, is irresponsible in both letting issues linger until its convenient and wasting the time of the board.
Compliance & governance are necessary evils: We all know horror stories about the high-flying startups that fail from lack of governance, control and risk-management. Sure, those stories are memorable, but what about the other startups that never take-off from fear and conservatism? I'd argue they vastly outnumber the former. I'm not a governance expert, nor do I hold the liabilities of a director, but I believe a board should view compliance and "good governance" as a necessary evil, but not the object or primary goal of the board.
Perhaps a better frame from which to approach each decision or action is: "Will this make the boat go faster?"
Contentious decisions and debate
Many assume that a high-functioning board is always high-functioning. But they're human, and I'm yet to see any board demonstrate such consistency. Most fluctuate from meeting to meeting, or topic to topic. It also isn't as simple as "having great board members" and the rest working itself out.
It seems obvious when stated, but opening conversations from this perspective aligns towards quick decisions, often at the expense of the best outcome. When discussion begins with a conclusion, board members can immediately, consciously or not, anchor to their position, work to justify it, and dismiss other perspectives.
Back to the original question: Who's on the board?
Founders, and investors, envision perfect a board member as someone who has founded a similar business, overcome challenges and achieved success in a similar market, with similar solutions, customers and pricing, against similar competitors and with similar funding. These features tell nothing of the person's culture, personality or approach to reasoning - only to the content of their experience.
In a startup, this means the role of a director extends to supporting the development, culture and well-being of your CEO and her team.
"If the company outgrows the founder, well that is probably the fault of the board." - Michael Carden
I'll add that founder/CEO burn-out, depression and other mental or physical health issues, are probably the fault of the board too. The role of a founder/CEO is lonely and almost impossible to empathise. It is beyond doubt in my eyes that a board should be their CEO's most ardent supporters and closest allies - investing their time and networks in ensuring her growth and well-being.
With all of this though, even the best board is only half of the picture.
Dear CEO's: You are responsible for getting the most from your board.
As a CEO, it is up to you to enable, equip and guide your board members to be successful, just like an employee. Board papers aren't a work report to announce "Look what I did". They're an opportunity to educate your board, to give them the information and tools to genuinely understand and assess the challenges you face, and then to give informed guidance and to create value in your business.
A CEO's responsibility extends beyond preparation to directing the meeting itself. In a startup, a CEO should not fall back on their chairperson to drive board meetings, because even the best lack the insight and information to define success in the fast-changing environment of a startup. Once a company matures beyond a "startup", its chairperson will own more of this role (and here's a great guide to that), but until then CEO's must define the metrics that matter, provide context to make relevant contributions, and focus discussion on your challenges.