Board Management Tips for Startup CEOs
Startup boards are very different beasts than those of mature companies. For CEOs, it is an important and often underestimated part of their job to manage the board…”What? I have to manage my boss(es)?” For first time CEOs, it’s often the a new thing that they have to manage 4, 6 or more bosses at the same time. So with that in mind, here are a few tips on managing a startup board:
(10) Create an agenda/calendar. It is good form to schedule board meets for the entire calendar year. How many depends upon the stage of the company, but for most venture-backed startups it varies between 6 and 12 (not counting the unscheduled board calls for things like financings and acquisitions). Once you close your Series A, you’ll probably start with monthly meetings. If things go well, by the time you close your Series B, you’ll still have monthly “meetings,” but every other one might be a call instead of an in-person meeting. By Series C, you’ll be either down to 6 meetings per year (if things go well) or back to once per month in person (if things don’t go well).
Anyway, for monthly meetings, try to keep a format something like “third Thursday of the month” so that you can keep a regular spacing between meetings (otherwise you’ll inevitably end up with board meetings three weeks apart and nothing really new to discuss). This will be tough for your VC board members, because all 8 of their portfolio companies will be trying to do the same thing. It is also a good idea to indicate on the board schedule when certain major topics will be discussed, for example, review of first half performance versus budget (July), strategy review (September) next year budget (November), compensation plan (December), etc.
(9) Be prepared. It is easy to underestimate the preparation time required to have a good board meeting, particularly for companies that just raised their Series A and are starting formal board meetings for the first time. The initial meetings will require more time, but as you get a format and rhythm down, less time will be required. Initially, as CEO, you’ll probably need 1-3 days (spread out over about a week) to prepare for each meeting. Your CFO will probably need about the same amount of time, or perhaps a little more. And then, depending upon what your business does and its stage, you will probably need about a half day from the head of sales, CTO or head of operations/service. Other functional heads will only need to spend time if they are preparing for a specific agenda item like product strategy review. You typically want to start preparation 2 weeks before the meeting (which gives you about a week after the end of the last month in which to get preliminary numbers for the previous month).
(8) Deliver materials early. There is nothing more frustrating for a CEO than the fire drill board package creation the night before the meeting (and there is nothing more annoying for board members than not being able to adequately prepare for a meeting). For startups, best practice is to get the package out 3 days before the meeting (so if the meeting is Thursday morning, the package goes out Monday). Two days is acceptable and anything less is bad form worthy of a rebuke.
(7) Don’t bring the whole crew. There is a temptation to invite your entire management team to participate in board meetings, particularly when the company hits a rough patch. Don’t. You will want to invite certain managers to the meetings (head of marketing and sales in particular for Series B-ish companies), but do that judiciously and only for a portion of the meetings. For the most part, you will want to meet with the board without your team for the majority of the time. Be explicit in the agenda when you expect your team to attend and when not.
(6) Make sure the financials are accurate and well presented. Ideally, your head of finance should own the financials and operating metrics part of the board package. However, the finance function is typically a role that early stage companies hire junior people into who don’t have a lot (or any) experience presenting to boards. If that is the case, I’d recommend getting an experienced startup CFO to join your advisory board with the specific task of helping organize the financials and review the financial package. I recommend sending the financials as a separate package from the board presentation. Also, allocate time in the preparation process for a review of all the figures and include a fresh set of eyes where possible. Inaccurate numbers can kill a board’s confidence in management.
(5) Keep a consistent format. Be consistent both in format and in the presentation. For example, don’t change the presentation of the sales pipeline for each board meeting. Keep the discussion in the same order from meeting to meeting and use the same terminology.
(4) Preview big news. Part of effective board management is previewing big news one-on-one with board members, particularly “bad” news. While it takes time to do, it ultimately shortens the decision cycle as you can address issues and questions that would otherwise come out in a group session (and require follow up in another group session). On the other hand, don’t stretch out previews too long, lest the issue gets “tired.”
(3) Be Transparent. Every startup has bad news that comes along with the good, hopefully more of the latter. The key is to be completely transparent from day one and continue that as the business grows. Boards will naturally gravitate to the bad news, but be careful not to personalize it and begin to couch information to avoid getting beat up in a board meeting. Key to this is delivering accurate and timely financial reporting as well as other key business metrics. When in doubt, disclose.
(2) Be optimistic but balanced. You wouldn’t be at a startup if you weren’t an optimist, but be careful to not drink the whole glass of Cool-Aid. Your board members, particularly VCs, are as concerned with what can go wrong as well as right, more so in the early stages of the business. For example, when discussing last month’s (or quarter’s) sales wins (which every CEO loves talking about) also discuss sales losses and postponements and when talking about the next release, also discuss problems in delivery.
(1) Demonstrate that you (and the business) are in control. Overall, you want to use board meetings as a forum to show that you are in control and so is the business. If you have delivered materials early, then you should expect that board members have read them. You should not spend time walking your board through monthly bookings and cash burn figures. Obviously, board members can (and will) ask any question they want to, so if you find yourself fielding questions mostly about minutiae, it probably means your board is worried you (and more importantly, the business) are not in control. Plan your presentation, speaking tone and body language to deliver the message, “I’m in control.”