VentureBeat

[Editor's note: This is an op-ed piece by Nick Sturiale, a partner at the venture capital firm Sevin Rosen Funds. Among his investments was Xensource, the company recently acquired by Citrix.]

Across Silicon Valley, a crucial gathering occurs dozens of times every day: the venture-backed startup board meeting.

Drive past office buildings on highways 101 or 280 on weekdays, and you can almost feel the nervous energy radiating from corner conference rooms.

It’s a solemn convention where investors and management review a company’s progress and fulfill their fiduciary role for stakeholders.

Regrettably, these meetings often end up a waste of time, and not for dubious reasons. Well meaning CEOs frequently underutilize their board and subsequently set up a dynamic that can lead to directors questioning whether the CEO should be replaced.

Some CEOs use their board principally as an approval body for annual plans. Others take it a step further and rely on their board as a strategic advisor, an executive recruiter, a Rolodex for business partnerships, and counselor for follow-on financings. But many often miss the opportunity to build trust and an effective working relationship.

Earlier, when I was a start-up CEO, I felt like every board meeting was a de-facto management performance review. In fact, before each encounter, I’d imagine my investors humming Janet Jackson’s tune “What have you done for me lately?”

To avoid setting yourself up for failure, here are three highly simplified rules for running a superior board meeting and building a high-trust relationship with your outside directors:

1. Recast the agenda. Many meetings follow this agenda: A detailed department by department operations review with little actionable data at the board level. Several vice presidents stand up, dutifully review their slides and give a blow-by-blow account of how much activity they’ve got going on.

This dwelling on the operational minutia can create a misperception of business momentum – “look at all this activity, good stuff must be happening!” As a result, there is little time for discussing the hard or difficult issues impeding the company’s development: business model weakness, sales friction, investment opportunity costs, competitor moves, product engineering risks and management team holes.

The agenda should invert the topic and time allotment – to 20% presentation and 80% conversation.

One way to drive the agenda is to focus it around a key question or two. What are my (CEO) biggest worries? Why are we not growing faster? Where should we place our discretionary investment bets?

2. Enlist the board to help to solve the problem. Some CEOs struggle with how much to share with their board – assuming problems exposed reflect poorly on the CEO and management’s performance. Part of their ambivalence lies in a contradiction: Boards like to see that their CEOs are more paranoid than they are, but also want their CEOs to come up with solutions and carry an air of poise and confidence. So how a CEO discloses and characterizes a problem to his board is the problem…and the opportunity. The idea is to enlist members in helping solve the problem because when a board works on a problem it becomes invested in the outcome.

Otherwise, when problems finally emerge – as they always do – without early board involvement, these problems are perceived as “surprises.” Too many surprises and the directors begin to question whether the CEO is going to scale. Moreover, when directors develop a divergent and inconsistent set of opinions about how the company is faring, dysfunctional group behavior ensues and suddenly CEOs can lose control of their company.

The best boards develop a common insight around the key dynamics driving the company’s business. Common understanding is achieved by providing a holistic view set of snapshots/test results on how the company is faring and not cherry-picking the easiest results to measure. For instance, many startups tend to focus a great deal on quarterly bookings and less on market share, competitive position and trailing assumptions. One way to avoid this is to create a leading and lagging business indicators dashboard. On a table, contrast a column of leading metrics, such as the growth rate of leads, pipeline, bookings, average first order sales cycle against a column of lagging measures such as the growth rate of revenue, channel sell through, reorder cycle time, market share, customer profitability and satisfaction level. Using a dashboard, you avoid missing the early warning market signals where you are growing, meeting plan and celebrating, when in reality you are losing market share and your place in the league standings.

3. Ask your board to come prepared. Like a typical class setting where students have a mixed understanding of course material, some directors bring a deep grasp of your business and provide high impact counsel; others exhibit a superficial knowledge and bring a low value-added perspective. Never assume each director comprehends your strategy – often they do not. Keep in mind, you live and breathe your companies 24-hours a day, your board does not.

Guide your board to come prepared: Afford members the opportunity to prepare and request they come informed and ready to contribute. E-mail a packet with a one-page cover summary ahead of time (at least 24-hrs before the meeting, preferably sooner). Specify key issues, concerns, decisions that need attention/approval and areas the CEO wants specific help.

Also, regularly communicate with directors outside the meeting and review the competitive landscape and state of the business. The goal is to create contextual understanding to generate as many insights or “truth seeking moments” as possible such that the board discussions never gets caught up in low-level debates based on hearsay and opinion.

Recast the agenda, enlist the board to help solve the problem and ask them to come prepared. Employ these steps and you’ll create a board that operates as one of the biggest weapons in your arsenal.

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