Why do first-timers get it so wrong?
Firstly due to the nature of growth. At inception there is no company, no Board, no nothing. On Day1 when you have no dough there is no Board, and there won’t be on Day2 either and it will be many days until there is. Many days which are filled from dawn to dusk and beyond with Building A Company. And without A Company what would the point of A Board be?
Secondly the founder is a jack of all trades par excellence – no-one is a professional at everything – so a founder is the ultimate amateur in everything he does. On Day1 the founder has to do everything and only over time can chunks of everything be delegated to professionals in certain domains. It is generally a long time until the founder becomes a kind of mini-corporate CEO, a professional CEO, strategic in role with all tactical matters delegated. His attention will be scattered.
Thirdly Boards are infrequent things. At most in SmallCos monthly and often quarterly – this naturally depends on the stage of the company, the sums of external capital and a host of other factors. But it is a relatively rare event for the founder making him not just an amateur but one who rarely does that thing (something that stores up trouble for later when he/she eventually has to deal with professional Boarders – VCs, for whom Boarding is a huge part of their day job, or experienced portfolio NEDs for whom Boarding is their entire job).
However, I came to realise that, even more important than all the above is a simple point – first-time founders don’t know better.
They don’t know that their Board will be a Turbocharger, a tedious-to-painful meeting or a gallows.
If they know anything about Boards it will almost inevitably be infused with the 21stC zeitgeist – the dreaded Corporate Governance – control, structure and bureaucracy. This, along with the long-standing and perfectly reasonable idea that having raised sums of money the shareholders quite reasonably want some checking that it is not all being spent on sweeties, can and generally does produce a defensive mentality in the founder/CEO.
On the other hand what the serial entrepreneur, the experienced SmallCo NED and VCs know is that all Boards are about two things #CorporateControl and #CorporateCreativity.
At least 25 Statist Corporate Governance reports starting with Cadbury’s in 1992 have seen listed Boards become ever-more focused on #CorporateControl.
However in SmallCo, unlisted land, the initial priority needs to be almost entirely on #CorporateCreativity – you won’t make Day2 otherwise. Over time more #CorporateControl needs to seep in but the sine qua non remains growth. A NewCo/SmallCo is like a small fire – left unattended it will most likely go out. A BigCo is like a huge fire in high pressure boilers – left unattended it will most likely explode. It is this difference – along with Statist intrusion into and regulation of privately-owned Boardrooms (something quite anomalous that has only happened for less than thirty years in nigh-on five centuries of The Company existing) that means that SmallCo Boards and BigCo Boards have become much further apart then they were a few decades ago (and relative NEDing skills and culture nigh-on antithetical).
So if the first time founder is like a schoolboy dragging his satchel along the pavement reluctantly on a journey to somewhere he’d rather not go what is the serial founder’s attitude?
It’s simple – to take the extremes the serial founder knows that his/her Board can either be a huge contributor to his company’s success or a complete pain in the butt for him and risk finishing him off. As a result in almost every case the serial founder gives a high priority to creating a great Board. They create their Board, they design their Board, they do not let it happen to them.
The schoolboy has no choice but to go somewhere he would rather not. However you the founder left school some time ago – you have choices. Don’t drag your satchel to a school designed by someone else – create a forum around you that will support you, enable you, challenge you, add value to your business and yes provide an independent oversight that you aren’t spending all the recent raise on sweeties.
There are people in this world who know far more than you, have more experience than you, more contacts than you, more wisdom than you, more money than you. They will never work for you. However due to this oddity called “the Board” – they will come into your business now and then and if you pick them well they will bend over backwards to help you build a bigger, better, stronger, safer business around you.
What’s not to like?