[Extract from Chapter 9 of Realpolitik “Fixing Broken Boards]
Whatever your Board challenge your Chairman is likely to be the first port of call – after all apart from “it [the Board] is his job” he really should have vastly more experience of Boards than you. As a founder/CEO in a sense you’d like to delegate a lot of the Board functioning to the Chairman in the same way you’d like to delegate Marketing to a CMO. You want to retain involvement in input in both but you would really rather someone more experienced and better at it than you did all the heavy lifting and gripped both topics.
However if the Chairman is, or becomes, part of the problem then you need to start with him:
“If your Board meetings are bad change the Chairman, get better people on the Board. It’s vital [over the longer term] to get it right.”
If in a BigCo the Chairman is the capo di tutto cappi in a SmallCo, as we have noted, the founder/CEO is the actual head and heart for quite some time. All VCs will have examples of where a CEO was good as, say, a “first stage rocket booster” but then needed replacing with a “second stage” and so forth. Succession planning is one of the most important topics that a Board must be on top of.
More subtle than replacing the CEO/founder is the CEO/founder’s morale and drive. Nothing gets anywhere without a founder’s oomph and drive. The sheer grind can – and will – drain these reserves. In the modern world plenty of folk do not take enough holiday – or if they do it’s not real downtime away from the phone and email. Even though with plenty of adrenaline and youth this can be survivable for quite some lengths of time, everyone’s well needs refilling/refreshing at some point.
There are morale-boosting or morale-sapping things that a Board can do. One morale-sapping SmallCo Board mindset is that of “if the CEO wants a friend he should get a dog”, if he has issues then he should resign and go see a shrink. I caricature (slightly) but if that is “100”on a scale of 1–100 then there are Boards strung out all along the spectrum. Experienced SmallCo Board members will know in their bones that you need your creators to feel not just challenge:
“Generally a Board should be holding management accountable.”
…but also the lurv. Being Atlas and carrying the world on your shoulders is a lonely and difficult task. All of us have ups and downs and rhythms in life. Less experienced or more BigCo-focused NEDs can underestimate this aspect of caring for Atlas. One quote on the role of the Board is quite true:
“To hold the company accountable and look after its interests as a whole.”
However one must recall that the earlier stage the Startup the more that SmallCo utterly depends on the CEO:
“If I walk there isn’t a company … the founder is the business.”
If the CEO or team are demoralised, or even tired, or just lacking spring in their step the Board Needs To Address This as, after all:
“The Board is responsible for the company as a whole.”
Naive insistence on wanting tough cookies who never need lurv will simply produce CEOs who lie or spin to you on bad days. Not only that but one day they may well just “crack” apparently “out of the blue” and then you have a “sudden” crisis on your hands. Far better to keep your eye on a pressure gauge than merely have a red light which one day flashes “broken”.
One key morale-impacting issue at all stages of development is compensation:
“One of the most important aspects of the Board which can be easily neglected is putting in place mechanisms to ensure the management team are happy – compensation/incentives and defending those to the shareholders.” [slightly disgruntled sounding CEO]
As we noted earlier, an ad hoc, souk-like bartering approach to compensation can lead to unnecessary irritation and ultimately demoralisation.
In summary, any company needs a good Chairman – it is only inexperienced and new founders that I spoke to who didn’t get this. In SmallCo this is one of the most important hires for the founder/CEO.
Naturally SmallCo is nothing without a motivated and great CEO. Given the centrality of this position, before sharpening your knives when he pops out of a Board meeting to go to the bathroom, have a conversation about what the rest of you are already doing to make this situation better or worse.
And if you are the founder you are going to be a super rara avis if you really can – and more importantly want to – go all the way from founding NewCo to being a FTSE100 CEO. Better to have some idea up-front of your own vision of when you step aside than to return one day from the bathroom and find that others have thought this through on your behalf in your absence.