Extract from Chapter 1 of Realpolitik “Eight Essential Aspects Of Small Company Boards”
Essence 2 – The SmallCo Board Is Not A Small BigCo Board
That Companies change over time is so apparent that it barely merits mentioning. However, its corollary – that the Board needs actively managing – can all too often be neglected.
At inception when the Muse drops an idea into your mind you are the show of course. For substantive ideas you will need to build a team below you and a Board around you to help you nurture your tiny infant and grow it into a safe strong adult.
SmallCo and BigCo Boards have always differed substantially due to the nature of development. This applies whether a company or a child – the ratio of nurturing to controlling is very high in a newborn and rather lower by the time they are a teenager. The newborn needs constant support and attention to stay alive, the teenager can already cause enough havoc to need a greater control function.
All Boards have two main functions – creativity and control. The Startup to ListedCo Board journey has always involved a gradual movement of emphasis from Corporate Creativity to Corporate Control, from Prometheus to Fire Safety Officers.
On Day1 of NewCo you will be unlikely to have a Board. At some point you will have a real Board. Not just a legal, box-ticking, de minimis effort but a real one. Naturally in Startups the emphasis is all on creativity– Promethean talents of creating a bigger fire. The Board is there to support and enable that Promethean act of creating fire in the Startup, sustaining it, spreading it and making it ever bigger and ever stronger.
Increasingly, as your fire grows the Board has to keep more than half an eye on avoiding explosions and the control element increases. By the time you and your Board become a BigCo the principal perspective on “fire” per se is utterly reversed from creativity to control. The Board has mutated from folks offering shelter from winds, directions for finding kindling, and advice on how to build kilns to being much more akin to Fire Safety Officers. The Board frets far less about fires going out or fuel running out and becomes far more concerned with raging fires burning out of control or causing explosions.
It is for this reason of the nature of growth itself – even if “Corporate Governance” had never been created – that the early stage Board is antithetical to a mature Board.
In a rocket the first stage, second stage and third stage booster are all engineered differently. Ditto a growing SmallCo Board – you need different Board designs, different Board members, for the stages along your journey. Failure to understand this point means that you will neglect actively managing your Board which will be to the detriment of your Company.