Some things in life we can’t choose: birth order, the weather, embarrassing family members, and for most of us, our bosses.
CEOs are the exception – they can choose the funding partners that become their board members, who are in a way their bosses.
If you’ve raised venture capital, you know that accepting funding often means giving up majority control of your business. Selecting the right funding partners and board members can springboard a business from startup to stardom, while the wrong ones can create more friction, discord, and overall awkwardness than your uncle’s seventh glass of wine ever did.
Even worse, if you can’t effectively manage and work with your board, the board will replace you faster than you can say, “You’re hired.” Follow these rules to selecting and managing the board to give yourself and your company the best chance at longevity and success.
Comfort is Key
Pick the right partners for the right reasons. Ask yourself if this is a person you can partner with before considering the size of their checkbook. This might sound unrealistic, particularly for startup companies during their first round of funding. But remember that money is coming from an invested partner who has expectations. Partners don’t disappear when checks are cashed. You’re going to share all company news with them. And you’re not so much selecting a funding firm as you are welcoming an individual partner from that firm into the company. So make sure you choose based on comfort and chemistry as much as value and name brand. Poor chemistry is a major roadblock to achieving top results. Yes, you want to choose people who have had prior business success. Maybe at the end of the process you do select that first funding offer. But you owe it to yourself and your employees to do your due diligence – make sure cashing that check doesn’t cost you control of your business.
Control Your Company
Board members provide oversight and perspectives based on patterns they’ve seen in other businesses. Listen to them. They can pattern match your business with other companies they’ve worked with. Take their feedback into account when making the best decision for your company. Offering advice (and hiring and firing CEOs) are their only jobs. It’s your job to control the company. Make that clear before choosing anyone. Board members will occasionally try to push CEOs in a certain direction. Stand your ground if you don’t agree. You know your business better than anyone. I’ve heard CEOs say, “I knew it wasn’t right but the board made me do it.” Don’t do it. Don’t be the Yes Man or Yes Woman. Make the best decision for the company, and then explain to the board why you’re doing things your way.
Give the Good News, Break the Bad News
Board meetings are for crafting business plans. Don’t use them as your exclusive line of communication between yourself and your board. Share new information with them ahead of time, individually and in-person if possible, so that everyone is on the same page entering these meetings and you can all move ahead with future plans. When sharing good news, follow with a plan to capitalize on the momentum. It shows you have a clear direction for the company. If you have bad news, share it early and directly. Hiding bad news is the worst mistake a CEO can make. It puts you in job preservation mode – you begin making decisions based on saving your job rather than what’s best for the company. So just hit them with it (figuratively of course). Then detail your plan to fix it. Without a plan, it looks like you’re putting the problem on their plate and they lose confidence in your control. Construct a plan, and then deliver the news. Effectively communicating before board meetings will help maximize production during those meetings, and it’s a good way to show your partners that you’re being transparent in sharing all company information you have.
Establish Realistic Expectations
It’s all about managing expectations. Don’t shoot far beyond reach, but don’t sandbag your goals either. Identify realistically aggressive goals – a balance point – then meet or exceed those goals. Board members will often push you to commit to higher goals. Again, stand by your decision, and then explain it. Always explain your thoughts behind your decisions if you want backing from the board.
Manage the Meeting
Each board meeting is in some way an interview for your job as CEO. Board members are constantly wondering whether you’re the right person for the job. How well you control board meetings; how well you communicate your plans and ideas; and the level of chemistry and interaction you have with your management team all signal to the board that you’re fit to lead the company.
Board members want you to be in control. They’ll push back if they think they have a better idea, but they’ll also do it to see you stand your ground. Remember: this is a house united. You’re all working toward the success of the company. The right partners want you to lead. It’s your job to choose the right people and then effectively manage the board as part of your leadership role.